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What is the Unemployment Rate?
The Unemployment Rate is the number of individuals not working, which could be compared to the overall workforce. For example, if ten people out of 100 are unemployed, this would give an unemployment rate of 10%.
Why is it important to the Currency?
When individuals wish to invest in stocks, bonds and a currency, they prefer currencies backed by a strong economy with a robust employment sector. In addition, if unemployment is low, the central bank is also likely to increase interest rates or keep them high; again, this can support demand for the currency.
A lower than expected Unemployment Rate figure is positive for the currency.
A higher expected Unemployment Rate figure is negative for the currency.
Why is it important to the Stocks?
The Unemployment Rate can affect the Stock Market in 2 ways. A lower than expected Unemployment Rate can indicate a resilient economy and higher consumer demand. As a result, companies perform better; earnings are higher, as is investor confidence. This can cause the stock market to rise.
On the other hand, if the central bank is increasing interest rates, positive employment figures may support a further increase. Interest rates can significantly pressure the stock market.
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