- Nonfarm Payrolls report is expected to show US employers added 179,000 jobs in April.
- US Dollar could react to wage inflation component, the Average Hourly Earnings.
- The Bureau of Labor Statistics is set to report an Unemployment Rate of 3.5% in April.
The Nonfarm Payrolls (NFP) data will be released by the Bureau of Labor Statistics (BLS) this Friday at 12:30 GMT. The NFP release is expected to show job gains of 179,000 in April slowing from the 236,000 increase recorded in March.
The US Dollar (USD) has been struggling to find demand in the second half of the week with dovish Federal Reserve (Fed) bets dominating the financial markets. April jobs report is likely to trigger the next big action in the USD due to its potential impact on the Fed’s policy outlook.
Although the Fed raised its policy rate by 25 basis points (bps) to the range of 5-5.25% as expected, it scrapped the comment in the policy statement that read “some additional policy firming may be appropriate. Commenting on the labor market conditions in the post-meeting press conference, FOMC Chairman Jerome Powell noted that there were some signs suggesting that supply and demand were coming back into better balance. “There are no promises but it’s possible we can continue to have labor market cooling without big increases in unemployment,” Powell added.
What to expect in the next Nonfarm Payrolls report?
The highlight in Friday’s United States (US) economic docket is the release of the closely-watched US monthly jobs report data for April. Nonfarm Payrolls expectations are that the economy added 179K jobs during the reported month, down from the better-than-expected growth of 236K in March. The Unemployment Rate is expected to remain unchanged at 3.5% in the fourth month of this year.
Investors will also pay close attention to the Average Hourly Earnings, which is forecast to hold steady at 4.2% on a yearly basis, and the Labor Force Participation readings in the report.
Analysts at Wells Fargo expect payrolls growth to continue to softer at the beginning of the second quarter: “Slowly bending, not breaking, has so far been the story of the labor market this year. That is unlikely to change with April’s employment report. In March, nonfarm payrolls rose by 236K, the weakest print since December 2020. Signs were more encouraging in the separate household survey, where employment rose by 577K, causing the unemployment rate to tick back down to 3.5%. The labor force participation rate also rose for a fourth straight month.”
When will US February Nonfarm Payrolls report be released and how could it affect EUR/USD?
The Nonfarm Payrolls report is scheduled for release at 12:30 GMT, on May 5. With the US Dollar staying dangerously close to its weakest level against the Euro in nearly a year in the Fed aftermath, market participants will pay close attention to the labor market data to figure out whether EUR/USD could extend its rally.
In case the report reveals that labor market conditions remained tight with an NFP increase at-or-above 250K combined with a hot wage inflation print, market participants could re-assess the probability of one more 25 basis points (bps) Fed rate hike in June. In that scenario, the USD should gather strength heading into the weekend and cause EUR/USD to erase a portion of its weekly losses. It’s worth noting that the CME Group FedWatch Tool shows that the probability of a June rate increase less than 5%.
On the other hand, a disappointing NFP print, close to 100K, should confirm a pause in the Fed’s tightening cycle and even revive expectations for a rate cut later in the year. The USD is likely to come under renewed bearish pressure in such a case and provide a boost to EUR/USD during the American trading hours on Friday.
Meanwhile, Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for the EUR/USD pair and writes: “Euro bulls appear hopeful so long as they hold above the upward-sloping 21-Day Moving Average (DMA) at 1.0985. The 14-day Relative Strength Index (RSI) is pointing north above the midline, adding credence to the upside bias.”
Dhwani also outlines important technical levels to trade the EUR/USD pair: “On the upside, Euro buyers need acceptance above the recent range highs around 1.1090 to resume the uptrend Ahead of that, EUR/USD needs to find a strong foothold above the 1.1050 psychological mark. Alternatively, immediate support awaits at the bullish 21 DMA, below which the weekly low of 1.0942 could be tested before bears gear up for a test of the ascending 50 DMA at 1.0839.
Nonfarm Payrolls related content
About the Nonfarm Payrolls report
The US Bureau of Labor Statistics’ Nonfarm Payrolls report lists all new job positions created in non-agricultural industries over the previous month.
The monthly payrolls report has a strong association to the US Federal Reserve monetary policy, which can cause financial markets to fluctuate a lot. The NFP number is made public along with updates to data from prior months, which are likewise watched closely by currency and stock market traders.
Better-than-expected readings are typically seen as favorable (or bullish) for the US Dollar, while worse-than-expected readings are seen as negative (or bearish) for the USD. The Unemployment Rate and the Average Hourly Earnings are frequently as important as the headline NFP figure.
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