First week of the month for forex and cfd traders is usually capped off with the NFP (nonfarm payrolls) release. This week is no exception. According to the news released just now, the US economy added 142,000 jobs in August, below the expected 164,000, but up from July’s revised 89,000 (originally announced as 116,000). These numbers show that private employers are hiring at their lowest since 2021. While it may sound bad, analysts were quick to call it “soft but not as bad as feared.”
Such below-expectations data could impact the Fed’s upcoming interest rate decisions, as analysts now expect the 50 basis points rate cut to be more likely.
Why do NFP releases matter?
The US monthly jobs report serves as an indicator of economic growth and currency strength. Changes in employment positions are closely monitored by policymakers, being one of the key mandates on the Federal Reserve’s agenda when setting its policies, having a direct impact on currency performance.
With today’s release, all eyes are now on Fed Chair Jerome Powell and how he might approach a much-anticipated shift away from a focus on taming inflation to preparations aimed at guarding against job losses. Powell said in August that the “time has come” to adjust monetary policy due to potential “downside risks” facing the US jobs picture. These are just some of the developments traders should keep in mind, especially as we continue our journey through the trading markets in 2024.
Typically, despite the multiple indicators modelling estimates, NFP figures tend to surprise either to the upside or the downside, triggering considerable market volatility. Nevertheless, higher-than-consensus numbers tend to be bullish for the USD.
The Impact of Today’s Announcement
As expected, the release has further weakened the appeal of the US Dollar.
As a result, according to FXSteet, EUR/USD extended its winning spree for the third consecutive trading session on Friday, posts a fresh weekly high of 1.1150. Decent gains in the shared currency pair are driven by sheer weakness in the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slides further to near 100.60.
Similarly, XAUUSD was in a good position thanks to the weakened US Dollar and the strong Gold.
