Over Optimism Reigns: The NFP Report

The Event

Non-Farm Payrolls are released at 8:30 AM EST, Friday, April 2nd. This monthly event is the most anticipated of all regular Forex related announcements for the USD based pairs, tending to cause severe reaction.


The Non-Farm Payroll release measures the monthly change in employment minus farming. Labor/employment is one of the most critical segments of the US economy. The NFP is the most complete measure of U.S. employment levels, thus is closely scrutinized for clues on the state of the economy. The Federal Reserve is keenly interested in this figure as a rise signals a growing economy which potentially can lead to inflationary pressures forcing the Central Bank to raise interest rates. Conversely, a drop in this figure can indicate a contacting economy requiring a decrease in interest rates to kick start growth. Studies have indicated that the NFP release moves the EUR/USD an average range of 124 Pips in the first 20 minutes after release. The average daily range on the day of release is 193 Pips. This is greater than FOMC decisions, GDP and CPI announcements. As you can see this is an extremely important event for Forex traders, the king of all standard releases. Some Forex traders only trade this release, it is that important in the currency trading world.

Trader Take

Although the employment situation is improving in the United States. Where on earth are they getting these monster forecasts? The NFP is forecast to be 185k this time, up from negative 36 in March. It is similar to the ADP report Wednesday that was improved but way below the estimates. I believe a similar situation will occur Friday. The number will indicate a continued uptrend in employment but will likely miss the estimate. Interestingly, the equity markets will be closed Friday. The S&P 500 futures stay open until 9:15 AM thus should gauge the reaction in the equity market to the release. It’s a very tough call with the USD based pairs. I am expecting a muted reaction, but one never knows for sure.

David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.

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