Traders will be watching Friday’s Nonfarm Payrolls (NFP) report closely. They’re just as keen to hear comments from Federal Reserve Chair Jerome Powell, looking for signs of new guidance that would impact the entire US economy. The labor data, scheduled for release on Friday at 12:30 GMT, is expected to play a crucial role in shaping the Fed’s interest rate strategy and consequently influence the US Dollar’s price action.
With the jobs data release just around the corner, the potential impact could be enormous. Expectations are increasing that the Federal Reserve will be required to make steep rate decreases as businesses grow angry over the economic damage inflicted by tariffs enacted during former President Donald Trump’s administration. This uncertainty has traders on the edges of their seats as they load up in expectation of increased market volatility.
Expectations for Job Growth
Economists expect Nonfarm Payrolls to increase by 135,000 jobs for the month of March. That’s a drop from the strong 151,000 jobs gained in February. This expected slowdown comes in the context of increasing uncertainty within the US economy. With recent events, fears of a recession in the near future have never been higher.
Automatic Data Processing (ADP) got the week started with all new data out earlier this week. It’s good news that the American private sector added 155,000 new jobs in March. This is a huge jump from the revised total of 84,000 in February and beats economists’ predictions of 105,000. The analysts at TD Securities are sounding the alarm. They caution that payrolls likely lost some momentum in March, given mounting uncertainty over the US economic outlook.
In addition to job growth predictions, analysts expect the unemployment rate to hold firm at 4.1%. Others are forecasting an increase to 4.2% as the labor market starts to crack.
“We also look for the UE rate to rise for a second month straight to 4.2%,” – TD Securities analysts.
The Fed’s Rate Path and Economic Impact
It’s complicated The combination of the Federal Reserve’s recent policy decisions has created an unusual set of conditions for upcoming interest rate cuts later this year. Following March’s policy meeting, the Fed held its benchmark policy rate stable in a range of 4.25% to 4.50%. They predicted that two of those rate cuts would occur no later than 2023, as indicated by the updated Dot Plot chart below.
As Fed Chairman Jerome Powell noted, there’s a lot more uncertainty now about how policy changes, and especially tariffs, will affect the economy. He had a clear signal that once the labor market starts to weaken, the Fed will be there. They will act to ease monetary policy as appropriate.
“If the labor market weakens, we can ease if needed,” – Fed Chairman Jerome Powell.
As Powell remarked, policy change and its economic impact are laden with uncertainty. In doing so, he raised alarm bells about how outside events could affect the success of our domestic economy.
Traders are on heightened caution under the fear of a recession. These concerns are exacerbated by current global trade tensions and recent mass layoffs in the crypto space. As CryptoQuant correctly argued, Trump’s irresponsible tariffs have destroyed trade relations with over 100 countries. This adds another layer of uncertainty to an already murky picture for US employment data.
Market Reactions and Technical Outlook
With traders already widely pricing in the release of the NFP report, we should see some of the strongest reactions from the markets. Dhwani Mehta, Asian Session Lead Analyst at FXStreet, provided insights into the technical landscape for EUR/USD, noting critical support levels that could impact trading strategies.
“In case EUR/USD fails to sustain above 1.1050, the immediate support will come in at 1.0900. A daily close below this support level could prompt a test of the 21-day Simple Moving Average (SMA) at 1.0860. A deeper correction will likely challenge the 200-day SMA at 1.0731.” – Dhwani Mehta.
Our latest technical outlook illustrates the powerful effect that surprise shifts in jobs figures can have on currency trends. Such a disappointing labor market report giving an NFP reading below 120,000 would raise expectations for a Fed rate cut in May. This transition would surely further accelerate US Dollar depreciation.
Traders continue to prepare for tomorrow’s employment report. They know exactly how it can move the needle on monetary policy and the macroeconomic policy shift. This strong interplay between job growth and interest rates will, no doubt, continue to shape market sentiment for the next few weeks at least.