With tomorrow’s US Non-Farm Payrolls figure set to create major volatility across the forex marketplace, now may be a good time to look at what analysts are predicting the employment number will be, and how it could potentially affect the USD. At the moment, most forecasts are saying that the US added approximately 133K jobs in January. If true, the number would signal a marked increase over December’s figure of 103K, and would add further support to the notion that the US economy is recovering.
How the potentially positive number could affect the forex market and the US dollar in particular, is the subject of some debate. On the one hand, a solid US employment number would do a lot to boost investor confidence in the global economic recovery. This would in turn increase risk taking among investors which could potentially put pressure on the safe haven dollar while causing currencies like the euro and sterling to turn bullish. On the other hand, positive news out of the US could potentially cause investors to return to the greenback, providing that faith in the US economy goes up as a result.
At the moment, the first possibility appears to be the most likely. Throughout the last week, both the euro and UK pound have been bullish, while safe haven currencies like the dollar have gone down. This is despite positive US indicators, like Wednesday’s better than expected US ADP Non-Farm Employment Change. It appears that investors are looking for reasons to bet on higher yielding currencies, and tomorrow’s news may be the catalyst they need.
Experienced traders know that the Non-Farm’s figure is notoriously difficult to predict. That being said, if Wednesday’s ADP figure is any indication, the employment situation in the US is turning positive. Still, careful attention should be given to tomorrow’s news. The Non-Farm data is considered the most significant news release of the month, and heavy market movements are guaranteed to occur.
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Dan Eduard is a Market Strategist with ForexYard. His addition to the ForexYard team has brought a unique new perspective to our clients. Dan's ability to compare and contrast trans-national issues with events in the market is uncanny and many clients so far have used his advice to make leaps and bounds in their trading strategies. He has been published on the ForexYard Trading Blog and affiliate websites. He carries a BA in Political Science and an MA in History.
