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The outcome of the jobs report could critically impact the Fed’s thinking around the June FOMC meeting and massage market expectations for the June FOMC meeting – in turn, this could hold big implications for the USD, US equity indices and gold.
(Market pricing for each respective FOMC meeting)
It is a risk traders need to navigate, manage, and react to – here’s what’s expected.
Timings: 5 May at 22:30 AEST / 13:30 BST
Consensus expectations:
Statistics to consider:
Why the US nonfarm payrolls report is important?
While we await the FOMC statement, it seems highly likely the Fed will retain a data-dependant stance, and a modest tightening bias. This means the NFP report could genuinely influence rate expectations for the June FOMC meeting. At this stage the market prices 7bp of hikes for the June FOMC (a 28% chance of a 25bp hike), but if we get a solid jobs report, with a turn higher in wages then traders will increase the probability of a hike and that should be a USD positive. It would also weigh on gold and tech.
A weak AHE (vs expectations) would promote strong USD sellers and boost gold and risk.
The playbook
(The distribution of economists’ expectations)
It’s rare that all the stars align, and we get a weaker NFP, higher unemployment rate and a falling AHE and we can get conflicting forces in the different labour outcomes.
While the reaction in markets will be driven by the outcome vs expectations, we also consider market positioning and a market that is long of USD’s and short S&P500 futures.
Nonfarm jobs report:
Average Hourly Earnings:
Unemployment rate: the U/E rate is driven not by the NFP print (which is formed by the Establishment survey) but by the Household survey, which asks US households about their employment situation.
It’s time to consider the NFP report and the risks to your position - Could it be that the NFP report is the volatility event of the week?
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