Trading in Europe are peaceful. Key pair corrected after yesterday's moves. The euro / dollar fell from 1.1208 to 1.1174, GBP / USD - 1.3293 up to 1.3254.Market participants balance their portfolios in anticipation of the publication of the report on the labor market in the US (Non-farm Payrolls).
To help beginners:
--Farm Payrolls Non (the NFP) - a report that shows how many new jobs created in the non-agricultural sector of the US in the past month. Rayrolls - it's payroll, which is issued by the salary to employees. The report on the employment market in the US published smiling on the first Friday of each month at 16:30 (gmt + 3). Now 15:30 (gmt + 3).
NFP has a strong impact on the foreign exchange market, so traders are wary of these data. After the publication of the NFP, if the deviation of the actual value of the forecast have been significant, the market for a few seconds takes off. Work on NFP risky, so many traders before the publication of the report and try to close in time to watch the news from the market.
Indicator unpredictable, and the actual value is almost always deviates from the forecast of an average of 30-40 thousand. This, we emphasize, is about the average deviation from the forecast values. Deviations can be as high as 100 thousand. Besides constantly revised figures for the previous two to three months.
Market reaction to the July report
On Friday, 5 July, came a disappointing report on the US labor market. The number of new jobs in the US non-farm payrolls for July increased by 255 thousand. The forecast of 180 thousand. The figures for the previous two months revised upwards. Index for May revised down from 11 th. To 24 th. The June value is revised from 287 to 292 thousand. General revision was plus 18 thousand.
The level of involvement in the labor force increased by 0.1% to 62.8%. Unemployment remained at 4.9% (forecast was 4.8%, previous 4.9%). The index of average hourly earnings in the US was 0.3% in June (forecast was 0.2%, previous 0.1%).
The amplitude of price fluctuations on the news was 100 points. For two hours, EUR / USD fell to 1.1046. By the closing trading price returned to the level of 1.1105.
NFP Forecast for August
It is expected that the US economy 180 thousand. New jobs were created in August, the unemployment rate will drop to 0.1 to 4.8%, the average hourly wage will fall to 0.2%.
Previously published macroeconomic indicators in the US, have a positive impact on the NFP:
The consumer confidence index in August was 101.1 vs. 97.0 points (the previous value was revised from 97.3 to 96.7 points).
The index of consumer expectations from the University of Michigan in August rose from 77.8 to 78.7 points.
index of business activity in the field of the ISM Services for August will be released on 6 September.
The published data, which have a negative impact:
Last report ADP showed that in August, the private sector has created 177 thousand. Jobs against the expected 175 thousand. The July value was revised upward by 15 thousand., To 194 thousand. ADP index has a positive correlation with the NFP, so it is not necessary to he guided. I take it in this section, since the latter was lower than the previous value. And the response to it was not in the medium.
index of business activity in the manufacturing sector from the ISM fell from 52.6 to 49.4 (-3.2) in August. The employment index fell by 1.1 points, to 48.3.
consumer sentiment index from the University of Michigan in August fell from 90.4 to 89.9 points (forecast was 90.6).
What fluctuations are possible for different values of NFP for the major pairs to 15:30 (GMT + 3)?
Index NFP has a strong influence on the currency market. After its publication courses are broken up and for a few seconds overcome dozens of items, resulting in increased volatility. Between the prices Bid and Ask spread widens. This should not be surprised to know and volatility, as well as slippage on stop orders at the time of the news release.
Also important NFP and other components: the proportion of the labor force and wages. Their decline is the falling dollar, and growth - increase. Fed to increase interest rates wants to see stable growth of consumer price inflation and wages.
Since 15:30 (gmt + 3) on the movement of currencies is affected by several parameters, consider different options:
1. If the NFP figure will coincide with the forecast of 180 thousand ., Unemployment will drop to 4.8% and the previous performance will be slightly revised (no matter which way), then the euro / dollar and pound / dollar fell on average by 50-60 points. More unlikely, as 180 thousand will not be enough to force the Fed to raise rates in September, with weak ISM index in the manufacturing sector.
2. If NFP indicator is higher than the 170 thousand. To 30 thousand. And more, and the unemployment rate will remain at 4.9% or 4.9% decrease to a revision of previous values upwards, then the dollar will strengthen against the euro 100 points to the pound - 135 points (because of declining cross-country).
3. If NFP indicator is below 170 thousand . 30-40 thousand. C revision of previous values to the downside, then the dollar rate is expected to fall against other major currencies in the range of 90 points. Not only because the euro and pound yesterday quite gone after weak ISM.
price fluctuations on values are approximate, because the report contains many indicators: unemployment, the proportion of the workforce, the revision of the level of wages and the previous values. The basis of assumptions on the experience from previous NFP since 2001.
It is important to remember that the more the actual value deviates from the forecast, the greater the market fluctuations. First, market participants react to himself NFP, then the level of unemployment, and only then on the revised values for the last two months.