At the auctions in Europe, the dollar wins back losses. Currency market participants are waiting for the publication of data on US labor market (Non-farm Payrolls). Euro / dollar fell after yesterday's rally to 1.0858, the pound / dollar - up to 1.5115. The dollar / franc rose 85 points, to parity. Now let's talk about NFP.
To help beginners:
-Farm Payrolls Non (NFP) - a report that shows how many new jobs created in the US non-farm payrolls for the 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. Prior to transfer, the shooter left 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 October report
On Friday, Nov. 6, NFP report came out much better than expected. The number of new jobs in the United States engaged in the non-agricultural sector in October increased by 271 thousand. Jobs at the forecast 180 thousand.
General revision of the past two months was 12,000. The figure for August was revised upward from 136 to 153 thous., In September dropped from 142 to 137 thousand.
Unemployment in the United States in October fell by 0.1% to 5.0% (forecast was 5.1%). The index of average hourly earnings increased by 0.4% (forecast was 0.2%, previous 0.0%). The level of involvement of the population in the labor force remained unchanged at 62.4.
On the news, the euro / dollar fell to 1.0707. Pound / dollar to 16:30 MSK fell by 75 points after the news - up to 1.5026. After the October NFP major pairs traded sideways for 5 days.
NFP forecast for November
It is expected that the US economy in November was created 200 thousand. New jobs, and the unemployment rate remained at 5.0%.
Previously published macroeconomic indicators in the US, some of which affect the NFP:
The data show growth
Last report ADP showed that in November, the private sector created 217 thousand. Jobs against the expected 190 thousand. The October value was revised upwards by 8 thousand., Up to 196 thousand. Index ADP has no positive correlation with the NFP, but without driver Movement is able to influence the dollar pairs.
The employment index in the ISM manufacturing index rose from 47.6 to 51.3 (3.7). The main index fell.
The index of consumer sentiment from the University of Michigan in November amounted to 91.3 (1.4%) against the forecast of 93.1 and 90.0 a month earlier. In annual terms, the index was higher by 2.6%.
The data showed a decline
ISM index in the manufacturing sector increased from 50.1 to 48.6 (-1.5). The employment index rose.
Service ISM index fell from 59.1 to 55.9 (-3.2), the index of employment - from 59.2 to 55.0 (-4.2).
The consumer confidence index in November fell to 90.4. The previous value was revised upward from 97.6 to 99.5 (forecast was 99.1).
What are the possible fluctuations at different values of NFP for major pairs at 15:30 MSK?
Economic indicators often are contradictory, and given the unpredictability of the NFP, it is not known what data will be released at 16:30 MSK. The report from the US Department of Labor is important for the regulator, as it plays an important role in the decision to raise rates. The Fed is looking forward to the report to decide on the rate in December.
Indicator NFP has a strong influence on the currency 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.
If the state of the labor market improved in November, then on 16 December, the rate will be raised by 0.25% to 0.5%. The dollar strengthened throughout the market, but is unlikely to win back yesterday's losses. If the data disappoint the market, it is likely the strengthening of major currencies against the dollar in the range of 80-100 points. The market has not moved away from the performances of Mario Draghi. Do not be surprised if the market did not react to Friday's report.
1. If the NFP figure will coincide with the forecast of 200 thousand. Unemployment will remain at 5.0%, while the previous figures have been revised - the euro / dollar and sterling / dollar fell by 50 basis points from the level at the time of the report. However, US data released Canadian statistics. It can create a buzz.
2. If the NFP figure will coincide with the forecast of 200 thousand. Unemployment will remain at 5.0%, while the previous figures will be revised upwards - the euro / dollar and sterling / dollar fell to 100 points from the level at the time of the report.
3. If the NFP figure is below 200 thousand., Without a strong revision of previous values downward (rarely not under revision), by major pairs is expected to increase in the range of 100 points.
3. If the NFP figure is below 200 thousand., And will be revised previous values upward, then the first major pairs expect growth in the range of 70-80 points, then falling to 100 points before the weekend. Weak market report worked yesterday after the ECB meeting. Do not expect a strong decline of the dollar.
4. If the NFP figure will be higher than 200 thousand. 30 thousand. And more, and the unemployment rate will remain at 5.0% or below, the growth of the dollar waiting for the major currencies within 200 points.
Values fluctuations are 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 am relying on the experience of the previous NFP since 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 the level of unemployment, and only then on the revised values for the past two months.