The foreign exchange market is closely watching the upcoming Nonfarm Payrolls (NFP) report set to be released on Friday, September 1, at 13:30 GMT. As an important leading economic indicator, it shows where the United States labor market stands today. Indeed, forex traders watch it like a hawk for the most useful nuggets of info. The AUD/USD currency pair is expected to be specifically impacted by the release. It has since dipped a little and is now floating at about 0.6470 through the European trading session today.
Every month, analysts can’t wait to see how employment figures will change. Ultimately, these shifts are inextricably tied to the economy’s long-term growth prospects. Economists expect that US employers have created about 170,000 new jobs in September. This latter figure is a key measure to assess how strong the labor market is. It may complicate the future monetary policy decision-making.
Key Employment Indicators
The unemployment rate is predicted to hold steady at 4.3%. That steady number would indicate stability on the labor front. This stability would likely help calm jittery investors looking for positive signs of economic improvement. Average hourly earnings are expected to increase by 0.3% per month. On a year-over-year basis, they’re projected to increase by 3.7%. Wage growth is a highly coveted indicator of economic health, with far-reaching effects on consumer spending, inflation and more.
Monthly payroll estimates can vary wildly on a temporary basis. It goes without saying that traders should always be tuning this kind of data to their own strategy. The short-term market reaction would be drastically different depending upon if the actual results meet expectations or miss surprising the market.
Impact on Forex Markets
America’s monthly jobs report is widely considered to be one of the top economic indicators for forex traders. The resulting effects can cause extreme volatility spikes in the currency markets, especially for pairs such as AUD/USD. Market participants will be eager to see how these print outs in the weeks ahead will influence central bank policies in the future.
Recent comments from the latest Federal Open Market Committee (FOMC) minutes underscored worries among participants about a premature downshift on rate cuts. The minutes noted, “Most participants noted further rate cuts could add to the risk of higher inflation becoming entrenched or could be misinterpreted as a lack of commitment to the 2% inflation objective.” Those types of comments always show that monetary policy is still the dominant factor on traders’ minds as we get closer to the NFP data.
Current Market Sentiment
Currently, the AUD/USD pair is marginally lower on the day around 0.6470, a reflection of the cautious tone before the NFP hit. Traders are already knee-deep into the game of positioning themselves according to their own expectations for this report. They’re figuring in global economic factors that might affect currency movements.