Market Reaction to February 2017 NFP (March 10)

The US Nonfarm Payrolls and Unemployment Rate are out this coming Friday, March 10th 2017, at 13:30 (GMT), and will most likely cause significant volatility in the markets.

Considered the one economic indicator that never fails to trigger sharp market movements both in the minutes leading up to its release and in its aftermath, the NFP data is released by the US Department of Labor on the first Friday of each month and outlines changes in the number of employees, excluding farm workers and those employed by the government, non-profit organizations and private households.

Non-Farm Payrolls: 180K Consensus 227K Previous

US Unemployment Rate: 4.7% Consensus 4.8% Previous

NFP releases have been showing a positive trend over the past few months with jobs gains in excess of 150,000 being released since November 2016. However, wage growth has been somewhat disappointing and will therefore be more closely watched than the headline number. Federal Reserve policy looks to be moving towards a “tightening” with many economists predicting a rise in US Interest Rates as early as this month. On March 3, Federal Reserve Chair Yellen stated: “We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect”. Treasury Secretary Mnuchin has also insisted that the Trump Administration’s pro-growth policies are imminent, thereby adding to the likelihood of the Fed moving soon on rates.

If we see an NFP number < 150K, coupled with an Unemployment rate> 4.7%, the markets will see USD come under downward pressure. This will likely deter the FOMC from any rise in US interest rates in March. However, seeing an NFP number >225K, with the Unemployment rate remaining at 4.7% (or better), will likely result in the USD strengthening. This will lead to a more aggressive and accelerated raising of US interest rates by the FOMC, with a rise very likely to occur in March.

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