NFP Alert 05-05-2017

The US Nonfarm Payrolls and Unemployment Rate are out this coming Friday, May 5 2017, at 13:30 UK Time (GMT+1), and are expected to cause significant volatility in the markets. Considered one of the economic indicators that can produce sharp market movements both in the minutes leading up to its release and in its aftermath, the NFP data is released by the US Department of Labor on the first Friday of each month and outlines changes in the number of employees, excluding farm workers and those employed by the government, non-profit organizations and private households.

What to expect this month:

Nonfarm Payrolls: 180K Consensus; 98K Previous US Unemployment Rate: 4.6% Consensus; 4.5% Previous

Many analysts are forecasting a reading 10% lower than the YTD average of 209K. This should come as no surprise following last month’s very low reading. If you recall, the consensus last month was 170K and the market was surprised with a less-than-stellar gain of 98K jobs. US Employment has been a major impetus behind the recent US economic recovery but it has experienced some hiccups of late. If we see an NFP number <150K, coupled with an Unemployment Rate>4.7%, the markets will see USD come under downward pressure. An NFP number of >215K, with the Unemployment Rate remaining at 4.5% (or better), will likely result in USD strengthening.

The Federal Reserve will be closely monitoring the wage growth component as an inflationary signal as this will influence the frequency of rate hikes for the remainder of the year. As more people look to join the workforce, the Unemployment Rate is expected to head higher to 4.6 percent.

It will be important to note any revision from the previous month (98K) as this will impact market sentiment regardless of the current release.

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 US 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.