It’s that time of the month again. On Friday, October 4, the US Bureau of Labor Statistics will issue its Nonfarm Payroll (NFP) Report. Much anticipated by traders, the NFP report provides an overview of the general economic climate in the US, shedding light on the number of jobs added by the economy less the farming sector.
Throwback to previous data
While past performance is not indicative of future performance, when it comes to economic releases as important as the NFP, it’s always helpful to refer back to previous releases. This provides a solid comparison basis that helps traders understand the big picture as they attempt to establish a historical price pattern for various USD-linked asset classes.
So, let’s take a look at past data! In August, the US economy added 142,000 new jobs, changing the unemployment rate to a negligible extent (4.2%), according to data collected by the US Bureau of Labor Statistics. The top gainers were construction and healthcare, with 34,000 and 31, 000 new jobs added in each sector.
This reading was way below the 160,000 forecast, pressuring the buck, which lost momentum against most of its major peers, following downbeat data.
What’s next?
Economists at Trading Economics expect the US Nonfarm Payrolls to trend around 130,000 by the end of the current quarter. Meanwhile, other key economic releases mark this week’s economic agenda, including:
- The US JOLTS Job Openings posted an uptick for August, with 8.0 million jobs being released versus 5.3 million hires, as reported by the US Bureau of Labor Statistics on Tuesday. This is an indication that the US labour market is still in demand and might echo through the NFP reading on Friday.
- Fed Chairman J. Powell’s comments from the discussion at the National Association for Business Economics Annual Meeting held on Monday, September 30, highlighted that the Fed’s approach to interest rates will be data-dependent going forward, and “decisions will be meeting-by-meeting”. This ends the market euphoria around interest rate cuts, leaving room for market jittery.
- The headline PMI reading was unchanged from a month earlier (47.2), with some of the main subindexes falling in contractionary territory, including the Prices Paid component which dropped to 48.3 from 54 and the Employment Index, which slipped to 43.9 from 46.
- Meanwhile, Israel is rolling out a full-blown ground offensive in Hezbollah-dominated Lebanon. The Islamic group are firing back against Israeli troops stationed in the proximity of Metula. At the same time, the UAE has raised concerns over Israel’s behaviour and warned of repercussions that this status quo will have for the entire region, Bloomberg notes.
What does this mean for the US dollar?
In short, risk aversion. The USD rallied against the GBP on Tuesday, as an effect of the burning conflict in the Middle East, almost unfazed by the contracting PMI data. GBPUSD tumbled more than 0.50% on Tuesday, leaving the door open to a break below 1.3300 and the possibility for further downside risk.
The disturbing effects of the escalating tensions in the Middle East also reverberate through the equity markets, with most of the global indices posting losses, as traders run to safety. The Dow Jones was down 0.7%, while the S&P 500 slumped 1.2%, and the NASDAQ Composite 1.6%.
Oil, which tends to benefit from the war fear, gained as much as 4.6%, alongside safe havens such as gold and Treasuries, bolstered by investor demand. Despite renewed US dollar strength, XAUUSD peaked above $2,660, as the yellow metal shimmers brighter and brighter on traders’ radar.
With so much going on, it’s vital to stay informed. TibiGlobe strives to bring you the latest market news and equip you with all the knowledge you need to navigate these turbulent times. Follow TibiGlobe on Threads, X, Instagram, Facebook, and LinkedIn to stay in the know.
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Originally published on the TibiGlobe Medium Page.
