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NFP Forex - The highly anticipated Nonfarm Payrolls (NFP) data from the United States will be released on Friday at 13:30 GMT (21:30 WIB). The US employment report will be presented by the Bureau of Labor Statistics (BLS) and is predicted to have a significant impact on the movement of the US Dollar (USD).
What are the expectations for the upcoming Nonfarm Payrolls report?
The Nonfarm Payrolls report is expected to reflect an addition of 180,000 jobs to the US economy in January, down from 216,000 jobs in December. The unemployment rate is projected to rise from 3.7% to 3.8% during this period. Wage inflation, measured by Average Hourly Earnings, is expected to increase by 4.1% year-on-year in January, maintaining the pace from December.
US employment data is crucial in determining when and how quickly the Federal Reserve (Fed) will lower interest rates this year, especially after expectations for a rate cut in March. The Fed's statement during Wednesday's meeting indicated a decision to maintain the benchmark interest rate, but with a somewhat hawkish tone, noting that a rate cut would not be appropriate until inflation confidence moves toward the 2% target sustainably.
During the post-meeting press conference, Jerome Powell, Chairman of the Federal Reserve, stated that the Committee would not reach the level of confidence needed to lower rates in March. Although March was not identified as a certain time, Powell emphasized that this should be viewed further.
The probability of a Fed rate cut in March dropped from 50% to 35% following the Fed's policy announcement, according to the CME Group's FedWatch Tool. Conversely, the market now gives a 90% chance for a rate cut in May.
Analyzing the January employment report, analysts at TD Securities (TDS) anticipate a significant increase in payrolls of 230,000. However, they also express concerns about the annual NFP benchmark and seasonal factor updates.
How will the January US Nonfarm Payrolls affect EUR/USD?
The Nonfarm Payrolls, a critical indicator in the US labor market, will be announced at 13:30 GMT (21:30 WIB). After gaining more than 1% in December and reaching a high of 1.1140, EUR/USD has experienced a technical correction as it enters 2024. Traders are bracing for potential volatility that could change the direction of this major currency pair.
If the Nonfarm Payrolls figure exceeds 200,000 and wage inflation rises, this could strengthen the Fed's hawkish stance, supporting the US Dollar and putting pressure on EUR/USD. Conversely, the USD could face renewed selling pressure if the data disappoints, raising speculation about a Fed rate cut in March. Although the Fed has rejected early rate cuts, any USD sell-off due to disappointing Nonfarm Payrolls figures is likely to be temporary.
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Disclaimer!
The analysis "NFP Forex January Update: Strong US NFP Challenges Rate Cut Prospects" is based on fundamental and technical views from trusted sources and does not constitute advice or solicitation. Always remember that this content is intended to enrich readers' information. Be sure to conduct independent research on other forex information before using it as a reference for your trades.
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