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NFP: 170K new jobs expected
BY Janne Muta
|October 6, 2023Today's Nonfarm Payroll (NFP) report is expected to show a moderated job growth with 170K new jobs in September 2023, reflecting a resilient yet gradually easing labour market. The report could significantly influence the Fed's policy trajectory and the USD valuation.
Implications of Surpassing NFP Expectations
Should the NFP report significantly surpass expectations, it might prompt a reassessment of the labour market's strength and the broader economic outlook. A robust job growth coupled with substantial wage increases could signal lesser slack in the labour market, potentially leading the Federal Reserve to hold the rates higher for longer in order to curb inflationary pressures.
Impact on USD and EURUSD
Consequently, a strong NFP report could bolster the USD further, especially against the Euro, reversing the recent 1% rally in EURUSD. The 7% rally in USD since the July high might find additional support as traders reposition in anticipation of a more hawkish Fed stance.
Concerns Following a Weaker NFP Report
Conversely, a significantly weaker NFP report could raise concerns regarding the sustainability of the current economic recovery, especially amid the Fed's tightening. A substantial miss in job growth alongside stagnant or declining wage growth might lead to a more cautious or dovish stance from the Federal Reserve, possibly prompting the Fed Funds futures traders to bet the first rate cut happens sooner than currently expected. The current expectation is that the first rate cut will take place in June next year.
Market Reactions to Economic Outlook
Under this scenario, the USD, which might have been overbought, could experience a pullback as traders adjust their long positions. The recent gains in EURUSD might extend further as market participants seek refuge in alternative currencies amidst a less optimistic outlook on the US economy.
Analysis of Recent Employment Data
Recent employment-related data signals the labour market remains resilient. The ISM Services PMI slightly declined to 53.6, indicating continued service sector expansion despite the Federal Reserve's tightening. Conversely, the Manufacturing PMI rose to 49, reflecting a slower contraction, hinting at easing challenges in the manufacturing sector.
JOLTS and ADP Reports Indicators
The JOLTS report showed a significant increase in job openings to 9.61 million, highlighting a robust labour market. However, the ADP report showed a decline in private-sector hiring, particularly in large establishments. Initial jobless claims marginally increased but remained near historical lows, affirming a resilient labour market amidst the Federal Reserve's monetary policy tightening.
While research has been undertaken to compile the above content, it remains an informational and educational piece only. None of the content provided constitutes any form of investment advice.
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DISCLAIMER: Tio Markets offers an exclusively execution-only service. The views expressed are for information purposes only. None of the content provided constitutes any form of investment advice. The comments are made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.
Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.
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