The United States Bureau of Labor Statistics (BLS) is set to release the Nonfarm Payrolls (NFP) data for September on Thursday at 13:30 GMT. This report is an invaluable resource for understanding the health of America’s dynamic economy. It is the primary driver of currency valuation and it sets the market’s expectations. Analysts predict that the Unemployment Rate will continue to hover around 4.3%, keeping in line with the last few months. They forecast a year-over-year rise of 3.7% in Average Hourly Earnings (AHE).
With the market riding on this upcoming release, the data’s potentially game-changing implications cannot be overstated. So it’s a double whammy with unexpected negative reading below the crucial 50,000 mark and surprise increase in the Unemployment Rate — both indicating slack in this jobs market. If so, that would likely renew market hopes for a possible Fed rate cut in December. On the other hand, solid NFP numbers would push back against those expectations, providing another boost to the dollar’s strength.
Expectations for Unemployment Rate and Job Gains
The consensus forecast for the Unemployment Rate is 4.3%, matching the last reading in August. TD Securities analysts expect a large rebound in September’s job gains of about 100,000 new jobs. Much of this resurgence is being pushed by a private NFP boom of about 125,000 private sector jobs. They predict a loss of around 25,000 in the public sector.
“We also look for the UE rate to go sideways at 4.3% as layoffs remain subdued. AHE likely moderated to 0.2% MoM (3.6% YoY),” – TD Securities analysts.
On the bright side, this stabilization could be an encouraging sign of a more resilient labor market withstanding elevated economic uncertainties. If it is confirmed, it would be another sign that the labor market is still showing signs of strength that may affect monetary policy decisions going forward.
Average Hourly Earnings Trends
Average Hourly Earnings are another one to keep an eye on. Analysts are looking for AHE to be up 3.7% y/y, matching the rate from August. A moderation to 0.2% month-on-month is expected.
“Job gains likely rebounded to 100K in September, supported by private NFP increasing 125K,” – TD Securities analysts.
All of these wage growth figures are important. They serve to exhibit the prevailing economic environment, and their effects directly affect consumer spending power as well as inflationary pressures. Across the country, wages are increasing at a breakneck pace. Such a trend would surely force the Federal Reserve to hesitate on future increases.
Potential Impact on Currency Markets
The implications of the upcoming NFP data go beyond just the employment numbers, they resonate heavily within currency markets. Given the possibility of weakness in the job figures, bears caution that the USD is susceptible to stronger selling pressure. If the NFP data should disappoint, this might be enough to lift the EUR/USD back toward the 1.1700 area. Market dynamics As a result of the recent strength of the USD, the pair is already below the 1.1600 limit.
“The main currency pair closed Wednesday below the 21-day Simple Moving Average (SMA) at 1.1574, reinforcing further declines,” – Dhwani Mehta, Asian Session Lead Analyst at FXStreet.
If the NFP report indicates a robust job growth trend and maintains the Unemployment Rate at or below 4.3%, then market expectations for a Fed rate cut will disappear. This development might extend the EUR/USD down toward long-term support at 1.1400 or even lower.
“In contrast, if the NFP shows an outstanding job gain and the Unemployment Rate stays at 4.3% or even decreases, EUR/USD could extend the bearish momentum toward levels under 1.1400,” – Dhwani Mehta.
This volatility reflects the delicate balance between labor market indicators and Federal Reserve policy expectations, underscoring the importance of the forthcoming report.