Market Risks on NFP Jobs Lean Toward A Positive Number

Today we have the NFP report which is the highlight of the week and might induce some large moves in financial markets. Markets are very agitated and a deviation from expectations might return the jitters, with both sides being at risk, however, a good payroll number might have a bigger impact, sending the USD surging.

USD Recovery and Labor Data Focus

The USD has bounced back after a four-day slide, with the USD Index (DXY) recovering more than 1.9% from recent lows. The DXY is now testing key resistance levels ahead of tomorrow’s much-anticipated US Nonfarm Payrolls (NFP) report. Expectations are for an increase of 140,000 jobs, slightly lower than August’s 142,000 gain. Historically, NFP figures come in above expectations around 70% of the time, making this report crucial for market direction.

Mixed US Employment Signals

Investor interest in labor data has been heightened following a week of mixed signals:

• JOLTS Job Openings and ADP data both showed strength, with ADP reporting 143,000 new jobs in September, up from 99,000 in August.
• However, the ISM Services Employment Index fell to 48.1 points, below 50 for the second consecutive month, indicating contraction in hiring.
• ISM Manufacturing Employment dropped further to 43.9 points in September, down from 47.1 in August, signaling continued weakness in manufacturing jobs.

Market Outlook

With just one more NFP report before the November FOMC meeting, a solid jobs number today could quash speculation of a 50-basis-point rate cut. The USD is expected to gain on a positive NFP result. Conversely, while negative data may not significantly impact the USD as long as  EUR/USD  stays below 1.10, any increase in the unemployment rate could give the USD additional momentum heading into the next few weeks.

EUR/USD Live Chart