At auction in Europe, the major currencies are adjusted to yield a report on the US labor market in December. Pound / dollar fell to 1.2358, the euro / dollar consolidated at the level of 1,580.
To help beginners:
--Farm Payrolls Non (the NFP) - this is 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 US employment market is published on the first Friday of each month at 16:30 (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.
The market response to the November report
On Friday, 2 December, came out an ambiguous report on the US labor market. The number of new jobs in the US non-farm payrolls in November increased by 178 thousand against the forecast of 175 thousand figure for September was revised from 191 to 208 thousand, in October -.... From 161 to 142 thousand total revision for September and October was - 2 thousand.
The level of involvement in the labor fell from 62.8 to 62.7%. Unemployment fell to 4.6% (forecast was 4.9%, previous 4.9%). The index of average hourly earnings in the US amounted to 0.1% in September (forecast was 0.2%).
To improve the performance report of the dollar were not so good. Reduced salary and a percentage of the economically active population. Due to the latter figure has decreased unemployment. The number of jobs created has coincided with the forecast.
The amplitude of the fluctuations in the euro / dollar accounted for 55 points. The Briton went up by 127 points. Its growth has been associated with a reduction in cross euro / pound before the constitutional referendum in Italy. On Monday, December 5 euro fell against the dollar by 150 pips.
NFP forecast for December
178 thousand. New jobs is expected that the US economy was created in November, the unemployment rate rose from 4.6 to 4.7% and the average hourly wage rose from -0.1% to 0.3%.
Previously published macroeconomic indicators in the US, have a positive impact on the NFP:
index of business activity in the manufacturing sector from the ISM in December rose from 53.2 to 54.7 points (+1.5). index employment index rose 0.8 points, to 53.1.
index of business activity in the field of the ISM services in December remained unchanged at 57.2.
The consumer confidence index in December was 113.7 vs. 109.0 points (previous value was revised from 107.1 to 109.4 points).
The index of consumer expectations from the University of Michigan in November rose from 85.2 to 89.5 points.
The index of consumer sentiment from the University of Michigan in November rose from 93.8 to 98.2 points.
The published data, which have a negative impact:
Last report ADP showed that in December, the private sector has created 153 thousand. Jobs against the expected 170 thousand. The value for November was revised downward to 1 thousand., To 215 thousand. ADP index has a positive correlation with the NFP, so you should not it navigate.
In December, the employment index in the ISM service index fell by 4.4 points, to 57.2.
What fluctuations are possible for different values of NFP for the major pairs to 16:30 (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. There are Friday, when peyrols comes to other important events, then in general a reaction to a weak report.
In addition to jobs and other important components of the NFP: the proportion of the labor force and wages. Their decline is the falling dollar, and growth - increase. They are important for the Fed to raise rates when. The regulator is unlikely to raise rates until April.
Since 16:30 (GMT + 3) on the movement of currencies is affected by several parameters, the review considered different options:
1. If the NFP figure will coincide with the forecast of 178 thousand., Unemployment will remain at 4.6% or rises to the level of 4.7%, the average s / n rise as predicted, the euro / dollar to fall by about 35-40 points, GBP / USD - 50 points. With declining MDF EUR / GBP EUR / USD rate will decrease by 70 points, the pound / dollar - by 35 points.
.. 2. If NFP indicator is higher than the 178 thousand to 30 thousand and more, and the unemployment rate will remain at 4.6% from the previous revision of the values in the direction of increasing, then the dollar will strengthen against the euro by 90 points, the pound - 95 points.
3. If NFP indicator is below 178 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 70 points.
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.
Vladislav Antonov analyst at Alpari