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May 31, 2018

AvaTrade, What to expect from US Nonfarm Payrolls (NFP) this Friday?

The Most Important Release of the Month: NFP

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This article is originally referred from Avatrade News.

Get ready for the most exciting economic event of the month.

US Nonfarm Payrolls (NFP) on Friday, June 1st, 2018 at 12:30 GMT

Last month, unemployment rate beat expectations, falling to 3.9% in April (forecast: 4.0%) and reaching an 18-year low.

Nonetheless, the US Nonfarm Payrolls heavily missed expectations (189K) for the second month in a row, with the US economy creating only 164K new jobs in April. This month, the consensus is lowering the bar of expectations, with a reading of 185K.

Nonetheless, the closely watched hourly earnings number, which helps traders evaluate the current health of the job market, missed the expectations of a 0.2% increase, with a reading of 0.1%. This month, the consensus forecasts a 0.2% increase.

The Federal Reserve aims to continue raising interest rates, however, the lack of inflation could lead to a more cautious pace than the markets anticipate.

Will this month’s data confirm the markets’ expectations on interest rates hike? Or will it lead the Fed to delay any hike for some time?

Market experts divide into 2 groups

Bullish factors for the USD

  1. The consensus predicts growth of 3% in 2018.
  2. Price pressures appear to be building up in a number of sectors.

Bearish factors for the USD

  1. The path of consumer spending is critical and presents downside risks for rate hikes.
  2. Foreign policy and trade relations are a source of uncertainty for the US economy.

What do you think? Will the EURUSD rise or fall?

What is the NFP?

The nonfarm payroll is released every first Friday of the month by the US Bureau of Labor Statistics and presents the number of new jobs created during the previous month, in all non-agricultural sectors.

Job creation is the foremost indicator of consumer spending, which together with the Average Hourly Earnings data, will help the Fed to determine its monetary policy in relation to the inflation in the country.
Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish),
although previous months’ reviews and the unemployment rate are as relevant as the headline figure.6

Original Source: Avatrade News

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