The U.S. Nonfarm Payrolls and Unemployment Rate are out this coming Friday, August 4, 2017, at 13:30 UK Time (GMT+1), and are expected to cause significant volatility in the markets.

An economic indicator that tends to trigger sharp market movements in the minutes leading up to its release and afterwards, the NFP is released by the U.S. Department of Labor on the first Friday of each month, outlining changes in the number of employees, excluding farm workers and those employed by the government, non-profit organisations and private households.

What to expect this month

Nonfarm Payrolls:

183K Consensus;
222K Previous

Nonfarm U.S. Unemployment Rate:

4.3% Consensus;
4.4% Previous

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What FxPro Analyst Team expects?

June witnessed a significant rebound in NFP, with 222,000 new positions added, and unemployment remaining at 4.4%.

This release is expected to be lower, at 183,000, which is still a strong enough figure to absorb new entrants into the labour market and potentially push the unemployment rate to 4.3% from the previous release of 4.4%.

While we can expect market volatility following this week’s release, many will be looking to see if hourly earnings are growing, as June saw 2.5% and July is expected to remain the same.

Without an increase in hourly earnings the markets do not expect consumer spending to gather pace, which would likely fuel upward inflationary pressure and consequently provide the Federal Reserve with more grounds to hike rates before the end of the year.

If we see a significantly bad NFP release of <150K, coupled with an Unemployment Rate of >4.4%, the markets will most likely see USD come under downward pressure. A strong NFP release of >220K, with an Unemployment Rate below 4.3%, will likely result in USD strengthening.

As always, it will be important to note any revision from the previous month (222K) as this will impact market sentiment regardless of the current release.

Keep in mind

• During the NFP announcement, expect high volatility, especially across USD pairs.
• Market sentiment can really affect currency movements. What traders expect from the report has as much impact as the actual released data, if not greater.
• A higher figure than the one registered during the previous month signifies an improvement in employment numbers. This, as well as the release of a higher-than-expected figure, mean an increase in the number of jobs created and are positive for both the U.S. economy and the dollar.
• A lower figure than the one registered during the previous month, as well as a lower-than-expected figure, usually have a negative impact on the dollar as they demonstrate a drop in employment numbers.
• Remember that the sudden spike observed across the charts of many currency pairs upon the release of the NFPs is usually followed by a period during which the market tries to recover and return to its initial price levels.

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