- US nonfarm payrolls are forecast to rise by 160,000 in August after gaining just 114,000 in July.
- The US Bureau of Labor Statistics will release its critical employment report on Friday at 12:30 GMT.
- Jobs data could help gauge the size of the Fed’s September interest rate cut, shaking the US dollar.
The US Bureau of Labor Statistics (BLS) will release the highly anticipated Nonfarm Payrolls (NFP) data for August on Friday at 12:30 GMT.
US labor market data is key for markets to gauge the size of the expected interest rate cut by the US Federal Reserve (Fed) in September, increasing volatility around the US Dollar (USD).
What to expect from the next Nonfarm Payrolls report?
The Nonfarm Payrolls report is expected to show the U.S. economy added 160,000 jobs in August, after creating 114,000 in July.
The unemployment rate is likely to fall to 4.2% in the same period from July’s reading of 4.3%. Meanwhile, a closely watched measure of wage inflation, Average Hourly Earnings, is expected to rise 3.7% in the year to August after climbing 3.6% in July.
August employment data will offer significant insight into the strength of the US labor market, which is crucial in shaping the Fed’s interest rate outlook at the September 17-18 policy meeting and beyond.
Fed Chair Jerome Powell indicated during his opening remarks at the Jackson Hole Symposium last month that an “unwanted additional cooling in the labor market” could warrant more aggressive policy action, prompting a 50 basis point (bp) interest rate cut.
Meanwhile, the Fed adjusted its July policy statement to mention that it is “vigilant to risks to both sides of its dual mandate,” rather than just pointing to inflation risks.
In a preview of the August employment situation report, TD Securities analysts said: “We expect US payrolls to rebound to just above the 200,000 mark in August after the downside surprise in July. The unemployment rate is likely to have edged back a tenth of a percent to 4.2% with wages rising a firm 0.3% m/m.”
How will the US August Nonfarm Payrolls impact EUR/USD?
The US Dollar (USD) has resumed its downward momentum against its main rivals, sending the EUR/USD pair back towards the 1.1100 threshold. Will the US NFP report double down on the Fed’s dovish expectations, lifting EUR/USD at the expense of the USD?
In the run-up to the US NFP showdown, weak Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) data raised concerns about a possible “hard landing” for the US economy amid further signs of easing labor market conditions.
The ISM announced on Tuesday that its headline US manufacturing index improved slightly to 47.2 in August from 46.8 in July, but remained in contraction while falling short of the estimate of 47.5. Wednesday’s data showed that US job openings fell to a 3-1/2-year low in July, coming in at 7.67 million, after 7.91 million openings in June, while falling short of the 8.1 million expected. The Automatic Data Processing (ADP) reported on Thursday that US private sector employment rose by 99,000 jobs in August after rising by a downwardly revised 111,000 in July.
Dismal US economic data has raised bets on a 50bp interest rate cut by the Fed at its September meeting. Markets now price in a 47% chance of a 50bp rate cut by the Fed later this month, up from 31% at the start of this week, according to the CME Group’s FedWatch tool.
If the headline NFP figure surprises with payrolls growth below 100,000, it could increase the odds of a big cut in September, exacerbating the US Dollar’s pain while pushing EUR/USD further north. Conversely, a strong NFP print combined with elevated wage inflation data would cool the outlook for aggressive Fed rate cuts this month, raising hopes that the Fed will opt for a more modest 25bp reduction. This could fuel a decent comeback for the US Dollar, reinforcing further EUR/USD selling back towards 1.0900.
FXStreet analyst Dhwani Mehta offers a brief technical outlook for EUR/USD:
“The EUR/USD pair is defending the 21-day simple moving average (SMA) at 1.1061, having reclaimed it on Wednesday. The 14-day Relative Strength Index (RSI) is pointing north well above the 50 level, currently near 58, suggesting that buyers are likely to remain in charge in the near future.”
“Buyers need to break the YTD high of 1.1202 recorded last month to challenge the psychological barrier of 1.1250. Further up, the July 18, 2023 high of 1.1276 will challenge bearish commitments. Alternatively, acceptance below the 21-day SMA at 1.1061 is critical for a sustained correction. The next healthy support levels are seen at the round figure of 1.1000 and the 50-day SMA at 1.0939,” Dhwani adds.
Economic indicator
Nonfarm payrolls
The most important result contained in the employment situation report is the monthly change in non-farm payrolls published by the US Department of LaborThe report publishes estimates of job creation for the previous month and revisions to the data for the previous two months. Monthly changes in payrolls can be very volatile and the release of this report generates high volatility in the dollar. A result above the market consensus is bullish for the dollar, while a result below expectations is bearish.
Next post:
Fri Sep 06, 2024 12:30 PM
Frequency:
Monthly
Dear:
160K
Previous:
114K
Fountain:
US Bureau of Labor Statistics
The US monthly employment report is considered the most important economic indicator for currency traders. Released on the first Friday following the reported month, the change in the number of employees is closely linked to the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, which affects currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tends to surprise markets and trigger substantial volatility. Actual figures that beat consensus tend to be bullish for the USD.
Nonfarm Payrolls FAQs
Nonfarm payrolls (NFP) are part of the U.S. Bureau of Labor Statistics’ monthly employment report. The nonfarm payrolls component specifically measures the change in the number of people employed in the U.S. over the previous month, excluding the agricultural sector.
The nonfarm payrolls figure can influence Federal Reserve decisions by providing a measure of how successfully the Fed is fulfilling its mandate of promoting full employment and 2% inflation.
A relatively high nonfarm payrolls figure means that more people are employed, earning more money and therefore likely spending more. Conversely, a relatively low nonfarm payrolls figure could mean that people are having difficulty finding work.
The Federal Reserve typically raises interest rates to combat high inflation caused by low unemployment, and lowers them to stimulate a stagnant labor market.
Nonfarm payrolls tend to have a positive correlation with the US Dollar. This means that when payrolls figures are higher than expected, the Dollar tends to rise and vice versa when they are lower.
The NFP influences the US Dollar through its impact on inflation, monetary policy expectations, and interest rates. A higher NFP typically means that the Federal Reserve will be tighter in its monetary policy, which supports the USD.
Non-farm payrolls typically have a negative correlation with the price of Gold. This means that a higher than expected payrolls figure will have a depressive effect on the price of Gold and vice versa.
A higher NFP typically has a positive effect on the value of the USD, and like most major commodities, Gold is priced in US Dollars. Therefore, if the USD gains value, fewer Dollars are needed to buy an ounce of Gold.
Moreover, higher interest rates (usually helped by a higher NFP) also reduce the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm payrolls are just one component within a larger employment report and can be overshadowed by the other components.
Sometimes, when nonfarm payrolls beat forecasts but average weekly earnings were lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the drop in earnings as deflationary.
The Participation Rate and Average Weekly Hours components can also influence market reaction, but only in rare cases, such as during the “Great Resignation” or the Global Financial Crisis.
Source: Fx Street

I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.