What to expect from the NFP❓

• Analysts estimate that the change in hiring will be +238,000 along with a 0.3% month-on-month increase in wages and the unemployment rate held at 3.8%
• However, leading indicators reported earlier indicate that the data may turn out to be higher than the above expectations
• The situation is similar if we look at the historical correlation over the past few months, when actual data turned out to be higher than expectations

The end of the week in the international markets promises to be really interesting, due to the fact that at 1:30 pm BST we will learn key NFP data from the US economy. The Fed's recent decision has further cemented for investors that the incoming macro data will determine whether interest rates in the US will be cut in Q3 2024, but whether we will have to wait until the end of the year for the first such moves. This, of course, has a huge impact on the sentiment observed in the stock markets, so we can expect today's report to cause a big jump in volatility on popular instruments. Here are the key details you need to know ahead of today's report:

What is the market expecting?

US NFP report for April. 

• Change in non-farm payroll Expected: 245,000. Previously: 303 thousand.
• Change in private sector payroll. Expected: 180 thousand. Previously: 232 thousand.
• Average hourly wages on an annualized basis. Expected: 4%. Previously: 4.1%.
• Average wages per hour on a monthly basis. Expected: 0.3%. Previously: 0.3%.
• Unemployment rate. Expected: 3.8% y/y. Previously: 3.8% y/y. 

What do other macro readings indicate?

• The ISM Manufacturing PMI employment sub-index rose to 48.6 from 47.4 last month.
• The ECI (employment cost index) clearly beat expectations for Q1, coming in at 1.2% versus an expected 1% increase
• ADP's employment report showed 192,000 net new jobs, above the expected 175,000
• Challenger's report indicated a sharp decline in planned layoffs relative to the March reading (66.79 thousand vs. 90.31 thousand)
• On the other hand, the 4-week moving average of unemployment claims fell slightly to 210,000 from 214,000 last month, remaining at a historic low.

Conclusion:

Given the data and historical correlation, indicators point to a slightly higher-than-expected reading in today's NFP report (combined with higher price/wage pressures) in the economy. At 3 pm BST, investors will also learn the ISM data for the US service sector, which could also be an important factor creating volatility in the markets.

Historical correlation shows us that since December 2023, each time the NFP data has turned out to be higher than analysts' estimates. Of course, past readings are not necessarily an indication of the future, so the data should only be analyzed as a snapshot. Source: Bloomberg Financial LP

USDJPY chart (D1 interval)

The impact of today's data may be particularly well seen on the USDJPY pair, where, in addition to data from the US, internal changes in Japan's monetary policy are of great importance. We are talking about the currency interventions made this week on the pair with the yen. At the moment, the pair is trading near the 153.00 barrier, which is connected to the 50-day exponential moving average visible on the chart (blue curve). For the moment, it is this zone that may serve as a key barrier to the long-term uptrend on the pair.

Source: xStation