News: Tomorrow. Are you ready to trade on NFP?

Thursday, December 3, 2020

Tomorrow. Are you ready to trade on NFP?

NFP has almost come. Are you ready?

Hello,

The U.S. economy added 638 thousand jobs in October 2020, which was above the consensus forecasts of analysts. The unemployment rate is gradually declining, which hits some optimism in the markets. These factors are primarily due to the positive news about the relatively successful COVID-19 vaccine trials from several U.S. companies.

What to expect this month:

Non-Farm Payrolls Employment

Last data: 638K
Consensus Forecast: 500K

Non-Farm Payrolls (NFP) is an economic indicator that shows the number of new jobs created in the U.S. non-agricultural sectors each month. It is a very important macroeconomic indicator of the country, which best reflects the dynamics of unemployment in the United States. The total number of people employed in the non-agricultural sector is about 80% of the total U.S. gross domestic product.

U.S. Average Hourly Earnings YoY

Last data: 0.1%
Consensus forecast: 0.1%

This indicator shows the change in the average hourly wage level for major industries, except agriculture.

Unemployment Rate

Past data: 6.9%
Consensus forecast: 6.8%

Past unemployment data came out better than the consensus forecast of 7.7% - 6.9%. It shows a stable, gradual decrease in unemployment in the USA, which has a positive impact on the U.S. economy and changes the rhetoric of the Fed.

Keep in mind:

During the NFP announcement, expect high volatility, especially across USD pairs.

Market sentiment can really affect currency movements. What traders expect from the report has as much impact as the actual released data, if not greater.

A higher figure than the one registered during the previous month signifies an improvement in employment numbers. This, as well as the release of a higher-than-expected figure, mean an increase in the number of jobs created and are positive for both the U.S. economy and the dollar.

A lower figure than the one registered during the previous month, as well as a lower-than-expected figure, usually have a negative impact on the dollar as they demonstrate a drop in employment numbers.

Remember that the sudden spike observed across the charts of many currency pairs upon the release of the NFPs is usually followed by a period during which the market tries to recover and return to its initial price levels.

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