NFP Forecast: US Nonfarm Payrolls growth set to ease down in July
|- US Nonfarm Payrolls are seen rising by 175K in July after June’s 206K increase.
- The Bureau of Labor Statistics will publish the high-impact United States jobs report on Friday at 12:30 GMT.
- The employment data could exacerbate the US Dollar’s pain after the Fed’s dovish hold on Wednesday.
Attention now turns to the high-impact Nonfarm Payrolls (NFP) data for July, slated for release on Friday at 12:30 GMT, as markets continue to assess this week’s US Federal Reserve (Fed) policy decision.
The US labor market data will be released by the Bureau of Labor Statistics (BLS), which could hint at another interest-rate cut by the Fed before the year’s end, as a September lift-off is a done deal. The US Dollar (USD) is poised for heightened volatility on the data release.
What to expect in the next Nonfarm Payrolls report?
The Nonfarm Payrolls report is expected to show that the US economy added 175,000 jobs in July, following a better-than-expected gain of 206,000 in June.
The Unemployment Rate is likely to stay unchanged at 4.1% in the same period. Meanwhile, a closely-watched measure of wage inflation, Average Hourly Earnings, is seen rising by 3.7% in the year through July after reporting a 3.9% increase in June.
The US labor market report is more significant this time around, especially after the Fed tweaked its July policy statement to mention that it is "attentive to the risks to both sides of its dual mandate", rather than previously only noting its attention to inflation risks.
On Wednesday, the Fed kept the fed funds rate at 5.25% to 5.5%, acknowledging “some further progress” toward its 2% inflation goal.
During the press conference, Fed’s Chair Jerome Powell said that “the broad sense of the committee is that the economy is moving closer to the point at which it would be appropriate to reduce our policy rate,” cementing an interest rate cut in September.
On the employment front, Powell said indicators show the job market has gradually normalized from “overheated” conditions. Although he tried to be rather cautious with his message, his take on inflation and employment only made markets believe that another rate cut could be on the table this year beyond September.
Meanwhile, the US private sector saw an employment gain of 122,000 in July after advancing by an upwardly revised 155,000 in June, the ADP National Employment Report showed on Wednesday. The data missed the market expectations of 150,000 in the reported period. Additionally, the BLS reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday that the number of job openings on the last business day of June stood at 8.184 million, against the 8.03 million expected.
Previewing the July employment situation report, TD Securities analysts said: “We look for July payrolls to move largely sideways vs June, printing 200k at the start of Q3. High-frequency data suggest employment growth has continued to hold up. Separately, the UE rate likely stayed unchanged at 4.1%, but the risk is that it drops back to 4.0% after its recent gains.”
“We also look for wage growth to cool by a tenth to 0.2% m/m, and down to 3.6% YoY,” the analysts added.
How will US July Nonfarm Payrolls affect EUR/USD?
The Fed’s dovish outlook fuelled a US Dollar (USD) correction across the board while the benchmark 10-year US Treasury bond yields attacked the key 4.0% level, lifting the EUR/USD pair back on the 1.0800 threshold. Will the pair sustain the rebound on the key US NFP release?
An upside surprise in the NFP headline figure and wage inflation data would pour cold water on additional rate cut prospects this year, allowing the US Dollar to come for air. This, in turn, could reinforce fresh EUR/USD selling back toward 1.0700. However, if the US employment data affirms loosening labor market conditions and the disinflationary trend in wage inflation, the Greenback could accelerate its corrective downside on renewed dovish Fed bets. In such a case, EUR/USD could extend the recovery toward the 1.0900 level.
Dhwani Mehta, Analyst at FXStreet, offers a brief technical outlook for EUR/USD:
“The EUR/USD pair faced stiff resistance at the 21-day Simple Moving Average (SMA), aligned at 1.0856 and returned to negative territory. The 14-day Relative Strength Index (RSI) turned south below the 50 level, currently near 42, suggesting that sellers could retain control in the near term.”
“A strong foothold below the July low of 1.0713 is critical to unleashing further downside toward the 1.0650 psychological barrier. On the flip side, buyers need to find acceptance above the 21-day SMA at 1.0856 for an extended recovery toward the 1.0900 round figure. Further up, the July high of 1.0948 could be challenged,” Dhwani adds.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.38% | 0.72% | -0.15% | 0.14% | 0.26% | 0.11% | -0.22% | |
| EUR | -0.38% | 0.34% | -0.53% | -0.25% | -0.10% | -0.27% | -0.60% | |
| GBP | -0.72% | -0.34% | -0.88% | -0.58% | -0.45% | -0.60% | -0.93% | |
| JPY | 0.15% | 0.53% | 0.88% | 0.28% | 0.40% | 0.20% | -0.11% | |
| CAD | -0.14% | 0.25% | 0.58% | -0.28% | 0.13% | -0.03% | -0.35% | |
| AUD | -0.26% | 0.10% | 0.45% | -0.40% | -0.13% | -0.15% | -0.48% | |
| NZD | -0.11% | 0.27% | 0.60% | -0.20% | 0.03% | 0.15% | -0.33% | |
| CHF | 0.22% | 0.60% | 0.93% | 0.11% | 0.35% | 0.48% | 0.33% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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