Non-Farm Payroll is Published by the US Department of Labour and it gauges the United States labor market health which is a major economic indicator that impacts the US dollar, equities, gold, and many other financial instruments.
Last month, the Non-Farm Payroll positive release stood as a catalyst for the US dollar’s massive gains. The strong data point drove the US Dollar Index to the upside by a wide percentage margin, with the currency ascending to a multi-year high against its most liquid counterpart the EURO hitting 1.0280 to 1.03 price level at the time of writing this article. This price level has not been seen since two decades, 2002. The recovery curve was triggered by the strong job data release of 390k, more than the market forecast of 325k. Huge progression in job recovery.
Lately, the Federal Reserve Chair, Jerome Powell speaking on the state of the job market and economic outlook said,
“Labor demand is very strong; job participation rate remains solid and the American economy is very strong and well-positioned to handle tighter monetary policy”.
Following his hawkish statements, the Federal Reserve took a bold step and hiked the interest rate by 75-point base. The aftermath of the rate hike rattled the stock market, commodities, indices, and the cryptocurrency market crashing down to multi-month lows. This swing into action was in an effort toward economic normalization and to drag the looming inflation down to its optimal range of 2% to 3% point. However, the dollar keeps gaining across the board and retains its position as the global reserve currency.
On the business spectrum, the narrative of the strong US Dollar will probably have a negative impact on businesses in the near term as declining export orders sets in. Also, the responses from business executives were progressively deteriorating as this is hurting many businesses and companies.
Currently, the US labor market is extremely strong and the attention has shifted to bringing inflation under control. The biggest drivers of inflationary pressures have shifted completely to commodity supply constrain and energy shocks. This triggered more than 20% oil and gas price hike caused by lingering geopolitical tension and sanctions on Russia. The US oil peaked to a multi-year high of 126.365 dollars per barrel followed by a slight pull back to the downside at 105.905 price level. The US inflation rate hit a 40-year high as the CPI (Consumer Price Index) soars above 8.5% following surging prices for gas, food and shelter. The unemployment rate stood at 3.6% low and the GDP remain robust.
What this means for the traders;
Historically, stronger US stock markets and higher commodity prices were usually supported by a strong US jobs market. However, there is a potential downside risk for the US Stocks Market and commodity prices as a result of a healthy job market report, but US Dollar will keep gaining across the board.
Nevertheless, Traders should brace themselves up for a period of high volatility as an increase in Non-farm Payroll will strengthen the USD while a decrease will weaken the USD.
In response to the news release, trade the financial market with the following trading instruments on the ACT Brokers platform(actmarkets.com), as the pairs are mostly affected by the data release; BTC/USD, ETH/USD, XRP/USD, EUR/USD, GBPUSD, XAUUSD, USDJPY, USDCAD, USDCHF, AUDUSD, NZDUSD, US30, US100, USOIL, Facebook, Amazon, Tesla, etc.
Time Schedule for the NFP release:
Date: Friday 8th July 2022
Time: 1:30 pm (GM + 1)
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