- U.S. Nonfarm Payrolls are expected to rise by 140K in September, consistent with August's increase of 142K.
- The Bureau of Labor Statistics will release the U.S. labor data on Friday at 12:30 GMT.
- This jobs data could significantly influence the Federal Reserve's interest rate decisions and, consequently, the valuation of the U.S. Dollar.
The Bureau of Labor Statistics (BLS) will release the high-impact Nonfarm Payrolls (NFP) data for September on Friday at 12:30 GMT. This report is expected to significantly influence the performance of the U.S. Dollar (USD) against its major rivals as markets speculate on the potential size of the Federal Reserve's interest rate cut in November.
What to Expect in the Nonfarm Payrolls Report?
Economists forecast that the NFP report will indicate the U.S. economy added 140,000 jobs in September, mirroring August's gain of 142,000. The Unemployment Rate is anticipated to remain steady at 4.2%. Additionally, Average Hourly Earnings, a crucial measure of wage inflation, is expected to rise by 3.8% year-over-year, consistent with August's figures.
The upcoming jobs data could reinforce expectations of a 50 basis points (bps) rate cut at the November meeting, despite Fed Chairman Jerome Powell's remarks earlier this week suggesting a cautious approach to rate cuts. Powell indicated that the Fed is not in a hurry to make quick cuts and projected two more quarter-point reductions if the economy performs as expected.
TD Securities analysts anticipate a modest pickup in payrolls for September, with expectations of a stable unemployment rate and moderated wage growth of 0.2% month-over-month (3.8% year-over-year).
Impact on EUR/USD
Leading up to the NFP release, markets are pricing in a 37% chance of a 50 bps rate cut in November, down from 53% earlier in the week. As expectations for a large Fed rate cut diminish and tensions rise between Iran and Israel, the USD has recovered from its one-year lows against major currencies.
Mixed data from the Institute for Supply Management (ISM) and the Job Openings and Labor Turnover Survey (JOLTS) did not change the market's outlook for a rate cut in November. The ISM reported that its U.S. Manufacturing Index remained in contraction at 47.2, while job openings rebounded to a three-month high.
The Automatic Data Processing (ADP) reported an increase of 143,000 jobs in September, suggesting a healthier labor market and leaving room for an upside surprise in Friday’s payrolls data.
If the NFP data reveals payroll growth below 100,000, it could signal a further slowdown in the U.S. job market and increase the likelihood of a larger rate cut in November, potentially driving EUR/USD back to 1.1200. Conversely, stronger-than-expected NFP figures alongside robust wage inflation could bolster expectations of a 25 bps rate reduction, further supporting the USD and pushing EUR/USD toward 1.0900.
Dhwani Mehta, an analyst at HubTrading, notes that the EUR/USD pair has breached the critical 50-day Simple Moving Average (SMA) at 1.1044, indicating a renewed downtrend. The 14-day Relative Strength Index (RSI) currently sits near 44, suggesting sellers may retain control in the near term.
A daily close below the 50-day SMA could lead sellers toward the 100-day SMA support at 1.0928, with the 200-day SMA at 1.0875 acting as the last defense for buyers. To alleviate bearish pressure, buyers must reclaim the 21-day SMA at 1.1102, with the year-to-date high of 1.1214 and the psychological barrier at 1.1250 in sight.
