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Non-farm Payrolls (NFP) report on employment in the US - a key event for the market in the evening
Trading in Europe is calm. The US dollar is trading almost unchanged against the pound and the rise in the euro. Euro / dollar has updated the session low and is trading at 1.1160. The pound / dollar has updated a maximum and is trading at 1.5151. Active traders in the market is low, because everyone is waiting for the publication of data on US labor market (Non-farm Payrolls).
To help beginners:
Non-farm Payrolls (NFP) - this report, which shows how many new jobs created is for agricultural for the US sector in the past month. Rayrolls - is payroll, which is issued by the salary to workers. The report on the employment market in the United States published the first Friday of each month at 16:30 MSK. After the transfer of the shooter began to leave at 15:30 MSK.
NFP has a strong impact on the foreign exchange market, so traders are afraid of these data. After the publication of NFP, if the deviation of the actual value of the forecast have been significant, the market for a few seconds darts off. Work on the NFP is risky, so many traders before the publication of the report and try to close during the news watching the market from the sidelines.
Indicator unpredictable and almost always the actual value deviates from the forecast of an average of 30-40 thousand. This, we emphasize, is about average deviation from the forecast values. Deviations can be as high as 100 thousand. In addition, constantly revised data for the previous two to three months.
Market reaction to the August report.
On Friday September 4th high volatility in the forex market persisted until the close of trading in Europe.Overall NFP report was a positive for the US dollar, despite the fact that in August had created fewer new jobs than expected. Projected growth of 220 thousand., In fact created - 173 thousand.
Data for July and June were revised upwards. A total revision amounted to 44 thousand. Unemployment in the US in August fell by 0.2% to 5.1%. (forecast was 5.3%). The index of average hourly earnings in the US in August was 0.3% (forecast was 0.2%, previous 0.2%).
The euro / dollar in the first minutes jumped to 1.1188. Three minutes later, already trading at 1.1089 (-99 points). By the close of the trading session evrobyki almost entirely played losses. Pound / dollar initially reacted to the news rising to 1.5271, and then for three hours fell to 1.5164 (-107 pips).
On Monday, market participants continued to analyze the Friday report on the US labor market. By evening, the pound regained all the losses and closed at 1.5273 rising. Euro / dollar traded all day long sideways and closed at 1.1168 against Friday's closing of 1.1145.
NFP Forecast for September
It is expected that the US economy in September was created 200-210 thousand new jobs, and the unemployment rate remained at 5.1%.
Previously published macroeconomic indicators in the US, some of which affect naNFP
The data show growth
1. Last ADP report showed that in September, the private sector has created 200,000 jobs against market expectations at the level of 194 thousand, while the August value was revised downward to 4000, to 186 thousand. Index ADP has no positive correlation with the NFP, but may have a significant impact on dollar pairs when there are no other drivers for movement.
2. The consumer confidence index in September rose to 103.0. The previous value was revised downward from 101.5 to 101.3 (forecast was 96.1).
The data showed a decline
1. The ISM manufacturing index fell from 51.1 to 50.2, the employment index - from 51.2 to 50.5 (-0.7).Service ISM index will be published on Monday.
2. The index of consumer sentiment from the University of Michigan in September amounted to 87.2 (-5.1%) against the forecast of 86.7 and 91.9 a month earlier. In annual terms, the index was higher by 3.1%.
Economic data often are contradictory, and given the unpredictability of the NFP, it is not known what data will be released at 15:30 MSK. The report from the Ministry of Labour is important for the regulator, as it plays an important role in the decision to raise rates. In September, the Fed refused to raise interest rates, but in his speech Dzh.Yellen said that it will be raised before the end of the year.
NFP has a strong impact on the market. Exchange rates after the publication of break up and for a few seconds pass dozens of items. Resulting in increased volatility and the spread widens. This is necessary to know and not to be surprised of increased volatility, as well as "slippage" of the stop orders at the time of the news.
Also NFP and other important components: the proportion of the labor force and wages. Their decline in the dollar is falling, the growth - increase. Fed to increase interest rates wants to see the growth of consumer inflation, but it needs to increase the salaries.
In August, the level of involvement of the population in the labor force has not changed compared to the previous month and amounted to 62.6% (unchanged for three months). With detailed reports Employment Situation Summary is available here. 15:30 MSK report for August will be after - will appear in September.
If the state of the labor market will improve in September, it will increase the likelihood of a rate hike at the meeting of October 7. In this case, the dollar strengthened. If the data disappoint the market, it is expected to shift the timing of November 18 (last meeting in 2015).
What are the possible fluctuations at different values of NFP for major pairs at 15:30 MSK?
1. If the NFP figure will coincide with the forecast - 200-210 thousand. Unemployment will remain at 5.1%, while the previous figures will be revised upwards or remain the same, while the dollar is expected to increase in the euro and the pound within 50 points.
2. If the NFP figure is below 200 thousand, without a strong revision of previous values downward (rarely happens that no revision), by major pairs may multidirectional fluctuations. The euro / dollar and sterling / dollar traded at significant price levels. According to him before the weekend is possible rebound.
3. If the NFP figure is below 180 thousand, and the value will be reviewed prior to the downside, then the major pairs are expected to grow in the range of 120-150 points before closing the trading session in Europe.
4. If the NFP figure is below 180 thousand, and the previous values will be revised upward (as last peyrols), then wait for the major pairs, first an increase of 40-50 points, and then fall by 60-70 points before closing the trading session at Europe.
5. If the NFP figure is higher than the 20 210 000 thousand and more, and the unemployment rate will remain at 5.1%, or down 0.1% from the forward growth of the dollar against other major currencies in the range of 100 points. GBPUSD could be reduced by 120-130 points.
Values hesitation I brought approximate because the report contains many indicators: unemployment, the proportion of the labor force, the revision of the level of wages and the previous values. I relied on my experience from previous peyrolsam 2001.
It is important to remember that the more the actual value deviates from the forecast, the greater the market swings. First, market participants react to himself NFP, then on the unemployment rate, followed by the revised values for the past two months.