Forex Crunch Jobs Hangover? Non-Farm Payrolls Preview

Jobs Hangover? Non-Farm Payrolls Preview

Posted: 28 Jun 2010 01:44 AM PDT

The upcoming release of the Non-Farm Payrolls will be a correction from the previous release due to government’s cut in jobs. Here’s a preview for the NFP on July 2nd, and the things to watch out for.

The decennial census that was held in May had an impact on Non-Farm Payrolls from the beginning of the year. Hiring of people to prepare the census lasted for a few months and culminated in May. We’ve seen a huge number last month – a gain of 431K. This is about to change:

The hangover comes now – the government is cutting the temporary workers that were hired and this will probably turn into a big loss of jobs – 100K this time. The markets are ready for a blow.

Similar to last month, the focus is on private sector hiring once again. Then, there were high expectations that this core number, uninfluenced by the census will rise by 180,000 jobs. But this turned into a bitter disappointment with only 41,000 jobs gained.

Also now there are high hopes – expectations stand on a gain of 113,000 jobs in the private sector, nearly three times last month’s move. Contrary to previous months, the earlier release of the ADP Non-Farm Payrolls is of high importance this time. As the focus is on the private sector, this independent release of private sector jobs could serve as a great indicator.

The expectations from the ADP release on Wednesday stand on a gain of 58K, about half of the expectations from the private sector gain in the official NFP. If the expectations from ADP are met, we could face a bigger slump in the NFP this time.

Regarding the unemployment rate, expectations are for a rise from 9.7% to 9.8%. A rise to 10% or more will be alarming while a drop to 9.5% will be a good sign. Any number in between will be disregarded and will leave the focus on the NFP.

Impact on forex

In the recent FOMC Statement, Ben Bernanke and his colleagues lowered the forecast for the economy. This hurt the dollar. Another disappointment in jobs will probably hurt the dollar yet again, and a positive surprise will boost it.

This means that the risk factor will be rather muted. When the risk factor is in play, a disappointing NFP will boost the dollar. Still, this is the most volatile event in forex trading. As I’ve written in the article 5 notes for Non-Farm Payrolls Trading, the initial reaction to the release at 12:30 GMT is not necessarily the direction that we’ll see afterwards.

So, trade with care and good luck!

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Forex Daily Outlook – June 28 2010

Posted: 27 Jun 2010 02:00 PM PDT

We start the week with exciting news; in New Zealand the NBNZ Business Confidence, Survey, The Group of Twenty (G20); is entering the second day, in Japan the Retail Sales are rising and lots more, let’s see what awaits us today.

In the US, Federal Open Market Committee (FOMC); Reserve Governor Kevin Warsh speaks at the Rotary Club, in Atlanta. Audience questions expected; and affects on where to set the nation’s key interest rates

Later in the US, Personal Spending and Personal Income are forecasted to rise by 1%. Consumer spending accounts for a majority of overall economic activity. Income is correlated with spending – the more disposable income consumers have, the more likely they are to increase spending;

Finally in the US, Core PCE Price Index Released monthly and measures the change in the price of goods and services purchased by consumers, excluding food and energy; is fairly stable and about to rise up by 1%.

Moving on to Europe, German Prelim Consumer Price Index (CPI); released monthly that measures the change in the price of goods and services purchased by consumers; is about to rise in 1% and affects the Bank interest rates.

Also in Europe, M3 Money Supply, released monthly that measures the change in the total quantity of domestic currency in circulation and deposited in banks; is about to rise up by 3% , it/’s correlated with interest rates first leads to spending and investment, and later leads to inflation.

Later in Europe, Private Loans, released monthly and measures the change in the total value of new loans issued to consumers and businesses in the private sector is about to rise by 1% and shows financial confidence

Borrowing and spending are positively correlated – consumers and businesses tend to seek credit when they are in their future and feel comfortable spending money;

For more on the Euro, read the EUR/USD forecast and Casey Stubbs' latest analysis.

The Group of Twenty (G20); is entering the second day, to meet about a range of global economic issues including the fiscal deficits, in Toronto. The G20 is an influential global policy-making body operating at the highest level, and can impact the currency markets;

In New Zealand, NBNZ Business Confidence, Survey of about 1,500 businesses which asks respondents to rate the relative 12-month economic outlook, 48.2 indicates optimism and measures the level of a diffusion index based on surveyed manufacturers, and service providers; a leading indicator.

Later in New Zealand, Building Permits, released monthly and measures the change in the number of new building approvals issued. Construction is important because it produces a wide-reaching ripple effect.

In Japan, a significant rise on Household Spending from – 0.7% to 0.4%. Consumer spending accounts for a majority of overall economic activity. It’s one of the most important gauges of economic health and measures the change in the total value of inflation-adjusted expenditures by consumers.

More in Japan, a slightly rise from last month by 0.2% on Retail Sales, It’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity and measures the change in the total value of sales at the retail level.

A small rise from last month of 0.1% on Prelim Industrial Production that measurers the Change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities; and also in the Unemployment Rate that measures the Percentage of the total work force that is unemployed and actively seeking employment during the previous month;

That’s it for today. Happy forex trading!

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