The US Nonfarm Payrolls are anticipated to experience a significant recovery in November. After a meager increase of 12K in October, economists predict a jump of 200K jobs this month. The United States Bureau of Labor Statistics is set to release this crucial labor data on Friday at 13:30 GMT.
This data holds great significance as it is a key determinant in gauging future Federal Reserve rate cuts and the direction of the US Dollar price. The Fed’s stance on interest rates and the dollar’s trajectory are highly contingent on the state of the US labor market as depicted by the NFP report.
What the November NFP Report May Reveal
For November, economists project that the US economy will have added 200,000 jobs. The October figure was distorted by two hurricanes and a strike at Boeing, leading to the unusually low gain. The Unemployment Rate is likely to tick up to 4.2% from the 4.1% reported in October. Average Hourly Earnings, an important measure of wage inflation, is expected to rise by 3.9% year-on-year after a 4.0% growth in October.
This report is vital for assessing the health of the US labor market and the Fed’s potential easing path in the upcoming months. Fed Chairman Jerome Powell has recently adopted a cautious stance on rate cuts, stating last month in Dallas that with the economy still growing, a solid job market, and inflation above the 2% target, there was no need to rush rate cuts. He also sounded optimistic about the US economy at the New York Times’ DealBook Summit on Wednesday.
TD Securities analysts, in previewing the November employment situation report, expect a mean reversion with around 75K jobs added back as the impacts of the hurricanes and strike subside. They also anticipate the Unemployment Rate to rise by a tenth to 4.2% and wage growth to cool to 0.2% month-on-month following October’s 0.4% increase.
Impact on EUR/USD
Recent US economic data releases and speeches by Fed policymakers have not significantly altered the market’s expectation of a 75% probability of a 25 basis points rate reduction this month, as per CME Group’s FedWatch tool.
Earlier in the week, the BLS reported an increase in JOLTS Job Openings to 7.744 million in October, exceeding expectations. The ADP announced on Wednesday that US private sector employment grew by 146,000 jobs last month, slightly below market expectations. The disappointing ADP report has raised concerns about the US labor market and set the stage for potential downside surprises in Friday’s payrolls data. However, the ADP data and official NFP data are not highly correlated.
If the NFP headline shows payroll growth below 200,000, the US Dollar could face intense selling pressure immediately after the data release as it would strengthen expectations of further Fed easing. In such a case, EUR/USD could move up towards the 1.0700 level. Conversely, a stronger-than-expected NFP print and elevated wage inflation data could heighten concerns about future rate cuts, giving the USD an upward boost and pulling EUR/USD back to 1.0400.
Dhwani Mehta, FXStreet’s Asian Session Lead Analyst, provides a technical outlook for EUR/USD. A decisive break above the 21-day Simple Moving Average at 1.0560 is needed for EUR/USD to extend its recovery towards 1.0700. If that level is reached, buyers will target the 50-day SMA at 1.0761 and then the 200-day SMA at 1.0845. However, with the 14-day Relative Strength Index still below 50, downside risks remain. Technical sellers could emerge if EUR/USD fails to hold the 1.0400 level, and further declines could challenge the November 22 low of 1.0333.
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Euro’s Trajectory Amidst Market Developments
Pound’s Rebound vs Dollar Amid Sentiment Shift and Challenges
