October NFP Report Impact in Forex
October NFP Report Impact in Forex
Written by: PaxForex analytics dept - Saturday, 02 March 2013 0 comments
Since the US Federal Reserve has started to print money in order, as they claim, to support the US economy the non-farm payroll or NFP report has took on an even greater role. Prior to quantitative easing or QE as it is often abbreviated a disappointment in the figures as well as an increase in the unemployment report often started severe sell-offs while the US Dollar was sold off heavily.
After QE many equity traders actually cheer for a worse than expected figure which is used as an excuse to buy equities while the US Dollar will be sold off. The sixteen day partial government shutdown in the US which lasted between October 1st and October 16th is expected to have a negative impact on the economy, but it is yet unclear how it will impact the labor market.
Here is what is expected from the NFP report which will be released this Friday:
What should forex traders expect?
The following three scenarios could be seen this Friday:
Wildcard:
Forex traders should watch out for revisions to the previous two month and add them to the headline number which will be reported on Friday.
After QE many equity traders actually cheer for a worse than expected figure which is used as an excuse to buy equities while the US Dollar will be sold off. The sixteen day partial government shutdown in the US which lasted between October 1st and October 16th is expected to have a negative impact on the economy, but it is yet unclear how it will impact the labor market.
Here is what is expected from the NFP report which will be released this Friday:
- Headline figure gain of 125,000 jobs created
- Unemployment rate to increase by 0.1% to 7.3%
What should forex traders expect?
The following three scenarios could be seen this Friday:
- NFP report comes in roughly as expected – This should lead to a sell-off in the USD which
means all currency pairs with the USD as the quote currency, such as the EURUSD, should rally while currency pairs with the USD as the base currency, such as USDCHF, should sell-off. - NFP report comes in better than expected – This should lead to a rally in the USD as forex traders will speculate that the Fed will at least discuss tapering QE and reducing it at an earlier stage than currently expected.
- NFP report comes in worse than expected – This should lead to a broad based sell-off and the USD should drop sharply lower as this would point to a more widespread weakness in the US economy.
Wildcard:
Forex traders should watch out for revisions to the previous two month and add them to the headline number which will be reported on Friday.