- US nonfarm payrolls are expected to increase by 170,000 in December, following an increase of 199,000 in November.
- The US jobs report could influence the market's assessment of the Fed's interest rate outlook and US Dollar price action.
- US employment data will be released by the Bureau of Labor Statistics at 13:30 GMT.
On Friday at 13:30 GMT the Bureau of Labor Statistics (BLS) will release top-level United States (US) nonfarm payrolls (NFP) data.
What to expect from the next nonfarm payrolls report?
The U.S. labor market report is expected to show that the economy added 170,000 jobs in the final month of 2023, down from an increase of 199,000 in November. The unemployment rate will be 3.8%. The measure of wage inflation, the average hourly wage, is expected to fall to 3.9% year-on-year in December, slightly less than the 4% increase recorded in November.
US labor market data is crucial to the Federal Reserve (Fed) interest rate outlook for 2024 and could therefore have a significant impact on the valuation of the US Dollar (USD).
In a context of cooling inflation in the US, markets consider that the Federal Reserve has finished its tightening cycle and expect rate cuts as early as March. According to the CME Group's FedWatch tool, the probability that the Federal Reserve will cut rates in March is currently around 65%.
Fed rate cut expectations rose substantially after the Fed's revised Summary of Economic Projections (SEP) showed in December that policymakers were forecasting a full 75 basis point reduction in the policy rate. In addition, Fed Chairman Jerome Powell acknowledged that officials have begun to talk about when it will be appropriate to cut the official interest rate. Powell further added that they are very focused on “not making the mistake of keeping rates too high for too long.” As for labor market conditions, “employment gains have moderated but remain strong and the unemployment rate remains low,” the Fed said in the monetary policy statement.
For their part, Austan Goolsbee, president of the Chicago Fed, and Loretta Mester, president of the Cleveland Fed, stated in late December that markets had anticipated the likely interest rate cuts. These comments, however, did almost nothing to alter expectations of a rate cut in March.
Previewing the December jobs report, TD Securities analysts said they expect steady growth of 150,000-200,000 in nonfarm payrolls for the third consecutive month and added:
“We expect continued weakness in the information/technology and financial sectors, while public jobs are likely to remain buoyant. We also expect the unemployment rate to rebound by one tenth after unexpectedly falling to 3.7% in November. Wage growth is likely show 0.3% month-on-month”.
Meanwhile, U.S. private sector employment rose by 164,000 people in December and annual wages rose 5.4%, according to data released Thursday by Automatic Data Processing (ADP).
How will November non-farm payrolls affect EUR/USD?
The non-farm payrolls report, a significant indicator of the US labor market, will be released at 13:30 GMT. The EUR/USD gained more than 1% in December and hit its highest level since July at 1.1140 before staging a technical correction to start 2024. US employment data could trigger a big reaction and help investors determine the next directional bias for the pair.
An encouraging NFP data, between 200,000 and 250,000 new jobs, combined with high wage inflation, could lead investors to reconsider the Fed's rate cut expectations, which would give wings to the recovery of the Dollar and weigh on the EUR/USD. On the contrary, the Dollar could come under new selling pressure if the data disappoints and confirms the Fed's pessimistic outlook. However, taking into account the market positioning, a massive sell-off in the Dollar on weak NFP data could be ephemeral
FXStreet analyst Eren Sengezer offers a brief technical outlook for EUR/USD:
“EUR/USD faces immediate support at 1.0930-1.0920, where the 50% Fibonacci retracement of the latest uptrend and the 200-day SMA meet. Should the pair begin To use that zone as resistance, technical sellers could still be interested. In this scenario, 1.0880 (61.8% Fibonacci retracement) and 1.0830 (static level) could be the next bearish targets.
To the upside, the 1.0970-1.0980 region (100-day SMA, 38.2% Fibonacci retracement) lines up as immediate resistance ahead of 1.1020-1.1030 (20-day SMA, 23.6% Fibonacci retracement) and 1.1120 (point end of the last uptrend).”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
