📢NFP report for July to be released today at 1:30 pm BST
Reports from the US jobs market are crucial for investors not only in the United States but also worldwide as they tend to have an impact on USD, equity markets as well as the level of Fed rates. Strong labor market seemed to be the only factor shielding the US economy from a real recession. As such, the key question right now is whether it remains strong enough to warrant further Fed tightening?
What to know ahead of the NFP release?
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile app-
US employment is yet to recover to pre-pandemic levels but labor fund is at new record highs
-
Jobless claims have been on the rise in recent weeks. Data for last week showed 260k initial jobless claims, up from 160k back in March
-
According to JPMorgan, initial jobless claims above 275k would hint at a recession
-
Job openings (JOLTS) dropped significantly recently but remain at very high level of 10.7 million
-
Pace of hiring in the US is still higher than pace of layoffs
-
Wages in retail and restaurant sectors increase quickly and lead to hiring problems in construction, healthcare and industrial sectors
-
ISM employment subindices remain below 50 threshold but have rebounded compared to June
What markets expect from today's release?
-
Median estimate points to a 250k increase in US employment in July, following a 372k jobs gain in June. If confirmed, it would be the lowest reading since December 2020
-
Unemployment rate is expected to remain unchanged at 3.6%
-
Wage growth is expected to decelerate from 5.1 to 4.9% YoY
-
Month-over-month wage growth expected at 0.3% MoM, in-line with previous month's reading
How may markets react?
Expectations for today's NFP report remain strong but it looks like investors would like to receive confirmation that the US economy is heading for a recession. As such, there is a scope that they will be disappointed if wage growth remains strong. In such a scenario, yields should continue on an upward trajectory, providing support for the US dollar. A jobs gain over 200k and wage growth at or above 4.9% YoY would be a positive for the economy.
USDJPY
USDJPY currency pair experienced the largest downward correction since the beginning of 2021. A drop was fuelled by a drop in US yields. However, Fed remained hawkish at latest meeting, putting upward pressure on yields and USDJPY alike. Key resistance to watch on the pair can be found in the 135.00 area.
Source: xStation5
GOLD
Gold continues to a V-shaped recovery. Gold trades higher even in spite of a recent pick-up in yields. Interestingly, we are observing quite a strong correlation between gold and S&P 500 index (US500, light blue overlay on the chart below). Should NFP disappoint (payroll below 150k and wage growth below 4.9% YoY), market odds for future rate hikes may drop. This would be a chance for gold to complete a V-shaped recovery. However, it should be noted that gold price nears the upper limit of a market geometry, what may limit further upside.
Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
