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We have taken a great time to discuss technical analysis of charts, now let us go further and talk about a major news which traders watch out for and that determines market movement as well – Non-Farm Payroll
The non farm payroll report, or NFP, is a monthly measure of the United States’ labor market by the Bureau of Labor Statistics. It is a part of the Employment situation reports which estimates the previous month’s employment in manufacturing, construction, and goods companies excluding farm workers, non-profit organization and private household employees.
The Employment situation report also includes the Labor Force Participation Rate, the Unemployment Rate, Average Hourly Earnings, and Average Workweek Hours, among many other statistics, however, the Non-farm payroll usually gets the most attention because it measures the actual number of paid employees both full and part-time, in business and government establishments.
The NFP report, which is usually released on the first Friday of every month, is known to usually cause great volatility in the forex market, this is why many traders, analysts and investors anticipate the NFP number and the impact that it will have on forex.
The report is important because it provides fresh insight into the overall health of the U.S. economy and how the labor market is doing. If the labor market is growing, that means more people are making money, and the more spending there will be. More spending results in a higher Gross Domestic Product (GDP) which is the broadest measure of the economy.
Also, it can have impact on interest rates. Higher employment usually leads to higher interest rates because of central banks’ monetary policies which is aimed at balancing inflation with growth, meanwhile, Interest rates is an important factor in the forex market.
The NFP news is usually released on the first Friday of every month by 1:30GMT on forexfactory.com There is usually the “actual” the “forecast” and the “previous” figures. The actual figure is the change in employment rate for the last month, the forecast, being the predicted change due to events that have happened and the previous is the figure for the change in the employment rate for the month before the one whose figure had just been released.
For example, an actual figure of “-1000K” means 100,000 jobs were lost in all non-agricultural businesses
Also, an actual figure of “270k” means 270,000 people were employed into all non-agricultural businesses
The NFP report generally affects all major currency pairs, but one of the favorites among traders is GBP/USD. Because the forex market is open 24 hours a day, all traders can trade on the news event.
An ‘Actual’ greater than ‘Forecast’ is good for currency and therefore a rise in the value of the currency is expected. An ‘Actual’ less than ‘Forecast’ is bad for the currency and it can therefore cause a depreciation in the value of the currency.