USD's Next Move All Depends On Today's NFP Data

Today at 4:30 PM Dubai time, US jobs data is scheduled for release, and the markets are waiting to see how the real reading will show compared to the expected and previous ones. Expectations indicate that the US economy added 181,000 jobs in April compared to 236,000 jobs in the previous month.  


This means that if expectations are true at 181,000 jobs, this signals that employment rates will continue to decline without significant support for previous employment data that has been extending for more than two years. In other words, this reading would indicate a major slowdown in the U.S. labor market, coming after previous data showed that job opportunities available in the United States fell to their lowest levels in two years in April. These readings are consistent with the current market outlook that the time for the Fed to finally pause its interest rate hikes is now.



US Jobs Data chart

US Jobs Data, Source: Bureau Of Labor Statistics



The jobs report is crucial in determining what the Federal Reserve is thinking with its monetary policy, along with expectations of the Fed’s final interest rate. According to analysts, the results could play out as follows.



  1. Reading is better than expected and better than the previous:


There are fears that the Fed will maintain sustained interest rate hikes. According to analysts, this could be positive for the dollar and negative for gold and equities.



  1. Reading comes in at or below expected:


The Fed will deal with loose interest rates, being potentially negative for the dollar and positive for gold and stocks, according to analysts.



  1. Reading between the previous reading and the expected reading:


This reading will be the most puzzling and volatile for price action.




Traders should consider the following.


  • There have been hints by the Fed that interest rates may be close to their peak.


  • Higher interest rates have already started affecting employment and growth rates, triggering a series of banking meltdowns in the United States and abroad.


  • It was noted that the final interest rate, which is necessary for inflation to reach 2%, is still unclear.


  • It was also noted that there are no clear signs of declining inflation rates.



In general, it is expected that the release of today’s jobs data will come with major fluctuations in the financial markets, given that the Fed relies on employment and inflation data before setting any change in interest rates.


Always note that the initial market reaction, regardless of the nature of the real reading, may be sharp and volatile before the market begins to return to stability. Traders should also consider that individuals have different ideas and convictions in the way they interpret the information issued, so prices won’t always move 100% according to that information.





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