In August, Nonfarm Payrolls (NFP) in the US rose by 235,000 and missed the market expectation of 750,000 by a wide margin.
How did markets react?
The U.S. dollar is sharply down across the board. As a result, GBP/USD, EUR/USD, and XAU/USD rose rapidly. Cryptocurrencies are benefiting too. The markets may stay volatile for the whole trading session, especially when the U.S. markets open in less than an hour. Watch out for SPX500 and other major U.S. ETFs! 📊
Why does NFP affect the markets?
NFP tracks the total number of jobs that were added in the USA by many entities across different private and government entities, excluding some types of workers. As might be apparent from its name, NFP excludes farmworkers in the agricultural industry mainly due to the seasonal nature of these jobs. The goal of the NFP is to provide an insight into the employment situation, which is better gauged by only including permanent job hires. 🇺🇸
Unlike the unemployment rate, a higher NFP reading is better. For example, if the NFP reading is 100,000 – this means that 100,000 jobs were added to the US economy. Of course, investors shouldn’t just look at the nominal figure of NFP, but rather how it compares to analyst forecasts. 🧐
So, usually, assets like Gold and Euro that trade inversely to the U.S. dollar tend to decline if NFP is better than expected, and vice versa.
Stay tuned for the next NFP release in October! 📊
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