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Why Non-Farm Payrolls Affect The Forex Market
Written by: PaxForex analytics dept - Friday, 03 June 2016 0 comments
Reported monthly, the U.S. Non-Farm Payrolls survey is compiled by the Bureau of Labor Statistics, a division of the United States Labor Department. It includes important employment data that is comprised through the compilation of two surveys: the household and establishment or payroll survey. This report shows what U.S. manufacturers and other businesses are thinking about when it comes to the economy. If business owners see positive economic growth in the future, they will increase hiring and boost overall survey results.
The reason the NFP is so important is that jobs data drives momentum in economic growth. When jobs are produced, sentiment starts to gain momentum and consumers will begin to spend more freely. Since nearly two-thirds of domestic product growth in the United States is driven by consumer spending, it is clear why job gains are so important. The combination of reporting a number that provides insight into potential consumer spending and the rate of inflation may make the NFP one of the key numbers produced on a monthly basis to capital markets traders.
The Non Farm Payrolls data has a top tier reputation as one of the most closely watched of all of the key fundamental indicators
relevant to the important U.S. economy by forex traders. Basically, the Non Farm Payrolls indicator provides economists and traders with one of the most important pieces of information with which to gauge if the U.S. job sector is growing healthily or contracting in a less favorable employment environment.
Traditionally there are many ways of trading the news including breakouts , news fades, and trading market dips. Trading NFP can be an exciting and often profitable pursuit for traders willing to enter into a volatile market. Regardless of the strategy taken, it is always important to keep an eye on risk / reward levels while minimizing the use of leverage in case the event volatility moves the market against your trade.
Employment will always be a hot topic when it comes to forex trading. It is a key driver of economic expansion and the basis for the survival of any economy. As a result, U.S. Non-Farm Payrolls will always serve as an important piece of news for the currency investor and trader. Those who know its implications and how to analyze it will always have an edge against those who don't.