Nonfarm Payrolls Cheat Sheet: Five Gold, Indices and Forex scenarios with the elections in mind

• Real Nonfarm Payrolls expectations are above the 113K seen on the economic calendar..
• The unemployment rate has significant political implications within four days to the US presidential election.
• There are five scenarios for Gold, Stocks and currencies.

Dozens of millions of Americans have already voted – but it takes only tens of thousands of undecided voters in swing states to tip the election. They may wait for the Nonfarm Payrolls (NFP) data point to decide.

First, a few quick comments:

First, real expectations are higher than what the calendar shows. ADP's private-sector jobs report printed a blockbuster increase of 233K, raising real expectations – despite the weak correlation between the figures.

Secondly, markets will first react to the headline number, which matters for the Fed, and then to the unemployment rate, which matters for politics. Former President Donald Trump promised tariffs and needs Congress to cut taxes. Vice President Kamala Harris needs Congress for spending plans.

It is essential to note that the change in jobs and the jobless rate are calculated via separate surveys, which may lead to mixed data. It has happened many times.

1) Within expectations: 113K to 140K, unemployment rate at 4.1%

An as-expected Nonfarm Payrolls report would allow Gold to extend its bullish run, albeit gradually. Stocks would edge up on a "Goldilocks" scenario of a strong economy and falling interest rates. The US Dollar (USD) would remain stable.

I do not expect any meaningful political ramifications in such an as-expected outcome. 

2) Above expectations: 140K or more, unemployment rate at 4% or lower

Initial reaction: A better-than-expected jobs report would hurt Gold, as it means higher interest rates. Stocks would rise, as a robust economy is positive for company profits, while interest rates are set to fall in any case. The US Dollar would rise on prospects of a higher path of interest rates. 

Second reaction: Once the dust settles, markets may look at the political implications. Such figures would help Harris, but not enough for a Democratic sweep, which has low chances anyway. 

Lower chances of a Trump victory mean no new big tariffs, which means a lower path for rates. That is bullish for stocks and Gold, bearish for the US Dollar. 

3) Below expectations: Less than 113K, unemployment rate at 4.2% or higher

Initial reaction: A terrible jobs report would send Gold up as it means lower rates. It would weigh on the US Dollar, and hurt stocks on worsening prospects for the US economy. 

Second reaction: Such a disappointment has political implications, increasing the chance Republicans win a clean sweep. That means that while would enact tariffs, his party would push for big tax cuts.

Prospects of a "red wave" are bullish for stocks and Gold. The drop of the US Dollar would stall due to expectations of higher rates, a result of an increase in inflation.  

4) Mixed data favoring Trump: Above 140K, unemployment rate rises 

Initial reaction: A strong headline would hurt Gold, while boosting the US Dollar and stock, as in scenario #2.

Second reaction: However, a high unemployment rate would increase the chances of a Trump victory, albeit without full control of Congress.

That would amplify the initial reactions in Gold and the US Dollar, as economic policy limited to tariffs would result in higher interest rates. This is Gold bearish and US Dollar bullish. For Stocks, it would be bearish, as elevated borrowing costs make equities less attractive. 

5) Mixed data favoring Harris: Below 113K, the unemployment rate drops

Initial reaction: gold bullish, stock bearish, and US dollar bearish, as in scenario #3. 

Second reaction: However, a lower jobless rate would be favorable for Harris, and that means a lower chance of new tariffs, meaning less inflation. That would further boost Gold and add pressure on the US Dollar. For stocks, it would be slightly bullish.

Final thoughts

There are many options and it may sound confusing. If there is one message I want to convey is that political considerations may trigger a whipsaw – a move that goes against the initial one. Trade with care.