The impact of Non-farm Payrolls on markets

The US Employment Situation Report is announced at 1330BST today. The Non-farm Payrolls number creates the headlines but increasingly in recent months traders have been assessing the report as a whole to see what impact the data will have. Going into the Non-farm Payrolls report the dollar has been very strong as the market has increasingly been pricing in a Fed rate hike in December. The CME Group FedWatch tool suggests a probability of around 63% for a December hike now. Non-farm Payrolls will today play a significant role in driving market expectations and could be a big mover on the markets. We assess the potential impact.

Non farm Payrolls

Good, Bad or just in line


The impact on the markets

With the market increasingly moving for a December hike (i.e. no move in November), moving into the report this will mean that good news will be good for the dollar and good for risk appetite. In contrast, a weak report would likely to begin a dollar correction on profit-taking, the size of which would probably depend upon the size of the negative surprise.

  • A report IN-LINE WITH CONSENSUS would probably be supportive for the dollar. It would help to re-affirm expectations of a December hike and help to continue the dollar’s outperformance against currencies such as the yen and sterling. The reaction on gold would probably be to fall back but not precipitously. General market reaction would be choppy and initial moves would probably be retraced.
  • A NEGATIVE SURPRISE would drive a US dollar correction. The dollar has been very strong now for almost two weeks and a weak payrolls report would give a chance for some profit taking. However it would also drive a sweep into safe haven plays. The yen would be strong, also gold higher and US Treasury yields lower. The euro would also probably be an outperformer, whilst the Aussie and Kiwi would be underperformers against other forex majors (ie. EUR/AUD can be expected to rally). Equity markets would also probably start to correct. The reaction on sterling would be uncertain due to the huge flash crash overnight, but potentially a choppy rebound.
  • A POSITIVE SURPRISE would be definitely strong for the dollar whilst also being risk positive and negative for safe havens. The big losers would certainly be the yen and gold whilst Treasury yields would also soar higher. The dollar would be strong certainly, but the other gainers should come on the riskier end of the spectrum, such as the Aussie and Kiwi which would likely outperform other forex majors such as the euro (i.e. sending EUR/AUD lower). Equities would be supported by the strong economic implications of the report.



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