Trading the News: U.S. Non-Farm Payrolls (NFP)
A 190K expansion in U.S. Non-Farm Payrolls (NFP) may curb the recent rebound in EUR/USD[1] as it puts pressure on the Federal Open Market Committee[2] (FOMC) to adopt a more aggressive approach in normalizing monetary policy. However, the updates may spark a lackluster reaction as Average Hourly Earnings are expected to hold steady at an annualized 2.6% in May, and signs of stagnant wage growth may push Fed officials to adopt a less-hawkish tone over the coming months as ‘inflation on a 12-month basis is expected to run near the Committee's symmetric 2 percent objective over the medium term.’
With that said, it will likely take a batch of above-forecast data prints to generate a bullish reaction in the greenback, and a further improvement in labor market dynamics may renew bets for four Fed rate-hikes in 2018 as ‘the Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.’
In contrast, indications of ongoing slack in the labor market may dampen the outlook for growth and inflation, and Chairman Jerome Powell & Co. may continue to project a neutral Fed Funds rate of 2.75% to 3.00% at the next quarterly meeting in June as ‘market-based measures of inflation compensation remain low.’
Impact that the U.S. NFP report has had on EUR/USD during the previous print
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