Currency Analyst since 2010

What to expect from US NFP?

By Elizaveta Belugina

US will release Non-Farm Payrolls figures on Friday, at 12:30 GMT.

Consensus forecast is that American economy has gained 220-225K jobs in July, while unemployment rate remained unchanged at 5.3%. ADP Employment Report for the last month came out weak (185K vs. 216 K expected), but ISM nonmanufacturing survey rose to a 10-year high and included a surprisingly strong employment component. It means that the largest sector in the world's largest economy is in great shape. Moreover, the unemployment claims are at their 40-year lows.

However, if we stay focused on the labor market, we can’t rule out the risk of some setback in July. Keep in mind, that during July there usually are large seasonal swings in employment, especially in education where teachers are fired and then rehired during the summer. There are other risks which may lead to weaker employment figures: weaker global economy, higher US dollar, decline in the number of oil rigs.  

Still, it looks like the market has positive expectations about NDF and USD, and traders want to keep their long dollar positions ahead of the payrolls report, expecting higher numbers. As we know, with NFP everything is possible, so beware of potential market’s disappointment.

Analysts at ING think that controversial data released this week means that there are no real clues about the NFP. The specialists stick to the forecast of 220K. Goldman Sachs revised NFP forecast up from 210K to 225K after the good ISM nonmanufacturing PMI. BNP Paribas, however, remains cautious and expect a reading below consensus, which will hurt USD.

All in all, we are going to see great volatility on Friday. Be careful with your positions and stops. It may be wise to enter the market only after the releases.

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