Market Insights

The United States will release its Non-Farm Payroll (NFP) data for June 2022 this Friday, July 8. The American economy added 390K jobs in May, which beat the market expectation of 325K additions. For June, predictions stand at an addition of 295K jobs. If the numbers beat the consensus once again, it could bolster the US dollar. But what if the numbers disappoint?

The NFP is an important economic indicator that shows the total number of non-farm workers in the US. Released on the first Friday of each month, at 8:30 am (EST), it is eagerly awaited by traders, economists and analysts alike. But why?

Economists and analysts look at whether the NFP figures meet market expectations and how they compare to the previous month’s numbers.

-If the NFP figures are high, it indicates a healthy labour market and a growing economy.

-Low NFP figures indicate that more people are jobless, which signals a failing economy.

Traders also look at whether the NFP figures meet, beat or miss the market expectations. If the numbers exceed or meet expectations, it indicates that the economy is growing, which raises market sentiment towards US-related assets. But if the numbers fail to meet the forecasts, it signals a potential decline in the economy, which leads to negative sentiment.

As an indicator of the health of the US economy, the NFP has a major impact on both the forex and stock markets. The forex market is impacted because the NFP numbers tend to impact the strength of the most traded currency, US dollar, and trader sentiment towards it.

When the NFP figures are high or when they exceed forecasts, the value of the USD tends to rise. This increased strength against other currencies lead to market participants being more optimistic about buying or investing in the greenback.

How does the NFP data affect other assets?

Due to the NFP being a signal of US economic health and impacting the value of the dollar, this economic release tends to impact gold, oil & gas and other commodities, especially those priced in US dollars.

Experienced traders keep an eye on the markets and the NFP data. They prepare in advance for market volatility preceding and following the data release by either taking positions based on analysis or staying away from the market till volatility subsides.

Vantage is a global, multi-asset broker offering clients access to powerful tools for trading CFDs on Forex, Commodities, Indices and Shares. We also offer a wide range of educational resources to help you learn how to deal with volatility during events like the NFP.