Non-Farm Payrolls Preview: Expectations And Potential Market Reactions

US jobs data set for release today at 4:30 PM GMT+4, and the markets are anticipating how the real reading will turn out compared to the expected and the previous readings. Expectations indicate that the US economy added around 203,000 jobs during July 2023, compared to the previous reading of 209,000 jobs.


Most importantly, job rates are currently stable at a support extension of around 3 years ago, and if the reading is less than the previous and the expected reading, this would lead to a slowdown, damaging to the labor market due to continuous interest rate hikes. But if the reading is better than expected, this would mean continued positive employment momentum. The jobs report is crucial in determining the pace of interest rate hikes and the final interest rate over the upcoming FOMC meetings.



US Monthly Jobs Data


US Monthly Jobs Data, Source: Bureau of Labor Statistics



Market expectations are as follows:


A reading better than expected and previous


The Federal Reserve maintains a tightening pace of interest rates, thus positive for the dollar and negative for gold and stocks.



A reading within or below expected:


The Federal Reserve is dealing with loose interest rates and therefore negative for the dollar and positive for gold and stocks.



A reading between the previous and the expected


This reading will be the most confusing and difficult to predict the price movement.



Traders should also consider the following essential points:


  1. If the real reading of employment is higher than 339,000 jobs, this signifies a very strong labor market and could have a larger impact on the markets.
  2. The Fed is afraid of any hasty cooling in interest rates, because this may lead to inflation becoming entrenched in the economy.
  3. The final interest rate for inflation to reach 2% is still unclear.
  4. There are no clear signs indicating the sustainability of the decline in inflation rates


So when reading today's job data expectations, traders should weigh the chances of continuous monetary policy tightening, and between calming this pace. The release is also expected to be accompanied by fluctuations in the financial markets, given that employment and inflation data are relied upon by the Fed in reading the economic scene before making any change in interest rates.


Traders should also remember that the initial market reaction, regardless of the nature of the real reading, may be sharp and volatile at first before the market returns to stability. Therefore it should be noted that traders have different ideas and convictions in the way they interpret the information issued and therefore, prices cannot move 100% according to that information.





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