NFP Preview: What Are Markets Expecting?

Later today at 5:30 PM (Dubai time), U.S. jobs data is set for release, and the markets await how the real reading will turn out compared to the expected and previous reading. Expectations indicate that the U.S. economy added around 198,000 jobs during February compared to a previous 353,000.


If the reading is lower than the previous reading and the expected, this indicates a slowdown in the labor market as a result of higher interest rates. If the reading is higher than the previous, this would suggest positive momentum for employment.


The jobs report is considered decisive factor for markets determining expectations for the pace of raising interest rates and final interest rate levels during the upcoming Federal Open Market Committee meetings.


Expected Scenarios From Analysts

Better reading than expected and previous reading: The Fed is likely to maintain a tightening pace with interest rates and may keep interest rates high for a longer period. Therefore, positive for the dollar and negative for gold and stocks.


Reading within or below expected reading: The Fed tends to deal with lenient interest rates, thus negative for the dollar and positive for gold and stocks.


Reading between the previous and the expected reading: This reading will be the most confusing, as it is difficult to predict specific price movement.


Traders should also consider the following points.


  • The Fed fears cutting rates too quickly as this may lead to another rise in inflation.
  • The Fed may not start cutting interest rates unless inflation has fallen to the 2% target.
  • Currently, there are no clear signs indicating a sustainable decline in inflation rates.


Generally, analysts expect that today’s data release will be accompanied by fluctuations in the financial markets, given that the Fed relies on employment and inflation data in reading the economic scene before making any change in interest rates.


Remember that the initial market reaction, regardless of the nature of the actual reading, may be sharp and volatile before the market begins to return to stability. Traders each have different ideas and beliefs in the way they interpret the information issued, and therefore prices cannot move 100% according to that information.



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