Nonfarm Payrolls (NFP) in the US rose by 227,000 in November, the US Bureau of Labor Statistics (BLS) reported on Friday. This reading followed the 36,000 increase reported in October (revised from 12,000) and came in above the market expectation of 200,000.
Other details of the report showed that the Unemployment Rate ticked up to 4.2% in November from 4.1%, as expected. The Labor Force Participation Rate edged lower to 62.5% in this period, while the annual wage inflation, as measured by the change in the Average Hourly Earnings, held steady at 4%, coming in above the market forecast of 3.9%.
Market reaction to Nonfarm Payrolls data
The US Dollar Index edged lower with the immediate reaction to Nonfarm Payrolls data and was last seen losing 0.2% on the day at 105.50.
The United States (US) Bureau of Labor Statistics (BLS) will release the high-impact Nonfarm Payrolls (NFP) data for November on Friday at 13:30 GMT. The Federal Reserve’s (Fed) future interest-rate cuts and the next direction in the US Dollar (USD) depend highly on the November jobs report.
What to expect in the next Nonfarm Payrolls report?
Economists expect the Employment Report to show that the US economy created 200,000 jobs in November, following a meagre gain of 12K in October due to distortions caused by two hurricanes and the strike at Boeing.
The November jobs report is critical to gauging the state of the US labor market and the Fed’s easing trajectory in the coming months, especially after Fed Chairman Jerome Powell’s recent cautious stance on rate cuts.
Last month at an event in Dallas, Powell said there was no need to rush rate cuts with the economy still growing, the job market solid and inflation still above the 2% target. Meanwhile, the Fed Chief sounded optimistic about the state of the US economy at the New York Times' DealBook Summit on Wednesday.
How will US November Nonfarm Payrolls affect EUR/USD?
The recent series of US economic data releases and speeches by several Fed policymakers did little to alter the market’s pricing of a 75% probability of a 25 basis points (bps) rate reduction later this month.
If the headline NFP reading shows a payroll growth below 200,000, the US Dollar could come under intense selling pressure in an immediate reaction to the data release because the figures could bolster expectations of further easing by the Fed. In such a scenario, EUR/USD could edge up toward the 1.0700 level.
Conversely, a stronger-than-expected NFP print and elevated wage inflation data could raise concerns about the prospects of future rate cuts by the Fed, providing extra legs to the USD uptrend while dragging EUR/USD back to 1.0400.
“EUR/USD needs a decisive break above the 21-day Simple Moving Average (SMA) at 1.0560 to extend the recovery toward the 1.0700 round level. If that level is scaled, buyers will then target the 50-day SMA at 1.0761 en route to the 200-day SMA at 1.0845.”
“However, the 14-day Relative Strength Index (RSI) is still below the 50 level, maintaining risks to the downside for the main currency pair. Technical sellers could emerge if EUR/USD fails to defend the 1.0400 level. Additional declines will challenge the November 22 low of 1.0333.”
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