- Non-farm payrolls are expected to rise by 75,000 in August, slightly above July’s 73,000 increase.
- Employment figures will be published by the U.S. Bureau of Labor Statistics at 12:30 GMT on Friday.
- These employment figures are crucial for shaping the Federal Reserve’s interest rate policies and the trajectory of the US dollar.
The U.S. Bureau of Labor Statistics (BLS) will unveil its non-farm payroll (NFP) data for August on Friday at 12:30 GMT.
The U.S. Dollar (USD) is poised for interest, as this employment report may shed light on the likelihood of the Federal Reserve cutting interest rates later this month.
What are your expectations for the upcoming non-farm payroll report?
Economists predict an increase of 75,000 in non-farm payrolls for August, following a modest gain of 73,000 the previous month. The unemployment rate (UE) might elevate slightly from 4.2% to 4.3% during this period.
In terms of average hourly earnings, a key indicator of wage inflation, a 3.7% rise year-on-year is anticipated for August, down from July’s 3.9% growth.
TD Securities analyst noted that, reflecting a recent slowdown, employment gains might be limited to around 25,000 jobs in August, with potential weak spots in manufacturing and business services.
They also point out that the July figures saw the unemployment rate holding steady at 4.2%, with AHE growth expected to stabilize at 0.3% month-on-month and 3.8% year-on-year.
Impact of August’s non-farm payrolls on EUR/USD
The U.S. dollar is rebounding from a five-week low against major currencies, which may influence the EUR/USD pair, potentially bringing it back to its weekly minimum.
Although a 25 basis point (BPS) rate cut is almost a certainty for September, expectations for larger cuts are rising, according to the CME Group’s FedWatch tool, which shows a 90% likelihood.
In a recent speech at Jackson Hole, Fed Chair Jerome Powell expressed concerns regarding the U.S. labor market.
“Negative risks to employment are growing, while GDP growth is evidently slowing,” he remarked during the symposium.
Powell emphasized that if these risks materialize, they could happen rapidly.
On the data front, U.S. ISM reported that the August PMI for manufacturing increased to 48.7 from 48.0 in July, though it missed market expectations of 49.
Meanwhile, the JOLTS report revealed a drop in U.S. job openings to a 10-month low of 7.181 million at the end of July, falling short of the expected 7.4 million.
The Automatic Data Processing (ADP) report showed private sector employment rising by about 95,000 jobs in August, following a revised increase of 106,000 in July.
Given the recent disappointing data, August’s employment figures are highly significant as the market grapples with future Federal Reserve rate cuts.
Should the NFP number fall below 50,000 and the unemployment rate climb, it might suggest a further deceleration in job growth, raising the prospects for a 50 basis point cut this month.
In such a scenario, the USD might experience significant selling pressure, boosting gold prices.
Conversely, if the NFP figure exceeds 100,000 and unemployment remains at 4.2%, the data could lead to a sharp retraction in gold values as it contradicts expected positive rate changes.
Dhwani Mehta, a lead analyst, provided a technical outlook for EUR/USD, suggesting that the pairing remains near the 1.1665 zone before the NFP data release. The 14-day relative strength index (RSI) is above the midpoint of the daily chart.
Buyers may need to push beyond the 1.1700 barrier to reach the August high of 1.1743, with the next bullish target possibly being 1.1789, recorded on July 24. Additionally, the 100-day SMA at 1.1521 might challenge a psychological milestone at 1.1450.
