American labor market in the spotlight

05.07.2019 11:54|Forex conotoxia.com

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Typically, on the first Friday of the month, a data from the US labor market is published. We are talking about the unemployment rate, non-farm payrolls (NFP) or average hourly earnings.

Over the years, the above mentioned macroeconomic publications aroused great emotions among investors and, as a rule, caused significant changes in the currency pairs with the US dollar. However, now the volatility during the publication itself is much lower due to the fact that the volatility on the currency market has generally decreased. Hence, emotions are slightly smaller, but labor market data is still important. Additionally, keep in mind that this will be the last publication before the US Federal Reserve decision on interest rates this month.

Market participants give a 26 percent probability that on July 31, the FED may cut interest rates by 50 basis points. 74 percent in turn is the probability for a cut of 25 basis points. Meanwhile, by the end of 2020, the market estimates almost 4 cuts. Today's labor market report may be crucial for shifts in odds on the scale of interest rate cuts in the United States, which may also have a significant impact on the US dollar.

Market consensus assumes a change in non-farm payrolls by 160,000. The average hourly earnings was to increase by 3.2 percent in June in annual terms, and the unemployment rate was 3.6 percent. Theoretically, if the reading of the publication will be higher, i.e. more jobs will be available along with faster growing wages, the dollar could take an advantage from this along with the increase in US bonds yields and a decrease in odds for two interest rate cuts this year.

And vice versa. Worse data than the market consensus, as it was a month ago, may lead to a shift in expectations towards the cut by 50 basis points and thus affect the continuation of strong increases in bond prices and lead to the depreciation of the American currency.

Data from the US labor market will be published today at 14:30. It will be an event of the day.

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.


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