Markets prepare for October’s Jobs data

US Non-Farm payroll expectations

• Consensus expecting NFP number of 235k
• Unemployment rate expected to remain unchanged at 5.9%
• Average Hourly earnings expected to rise 0.2%

The all important US non-farm payrolls will be released today at 0830 EST or about 1230PM GMT. As inflation and unemployment being the two main indicators that the Fed is watching, the NFP has obviously gained more importance, especially in terms of speculation for the interest rates hike.

The October print is expected to be another bullish reading with a headline print of 235k while the unemployment rate is expected to remain steady at 5.9%. Although the expectations are a bit lower compared to the previous month’s reading of 248k, the overall payrolls data has managed to stay above last year’s average of 220k.

The various labor market components such as the ISM manufacturing and non-manufacturing PMI surveys has shown an improvement, especially with the services sector reaching the highest levels, last seen 9 months ago at 59.6. Earlier this week the ADP employment change saw 230k new jobs being created. The weekly unemployment claims in the US also dropped lower with 278k and combining the above factors, expectations for a strong jobs report for October are riding high.

The US Dollar continues to soar higher in a sharp parabolic trajectory was also boosted by the BoJ’s stimulus expansion. Yesterday’s ECB press conference saw Mario Draghi clearing up the air about the ECB’s QE which is back on the table.

If the October jobs report does manage to beat expectations along with an improvement in the unemployment rate, the US Dollar could possibly rally even higher as speculation for the interest rate hike in the US around mid-2015 could gain serious ground.

Regardless, a print above 220k is likely to cement in the continuing strength in the Greenback and even if the headline print comes below expectations, the short term weakness in the US Dollar could offer some opportunities for trading pullbacks.

While the markets were expecting a dovish tone from the Federal Reserve in last month’s FOMC meeting, the Fed’s hawkish stand took many by surprise. An important takeaway was the change of tone from the Fed in regards to the US labor market with the phrase “…..sufficient underlying strength in the broader economy to support ongoing improvements in the labor market…”

Last month’s NFP reading showed a strong job growth posting a headline reading of 248k with some upward revisions to past numbers.

The forex markets will undoubtedly experience the volatility that comes with the NFP release. The key pair to watch will be the USDJPY, which is already supported technically with a possible rally towards 118 from the intra-day charts.