The first Friday of every month can be a profitable day in the currency markets. Reason: The U.S. Department of Labor releases its monthly Nonfarm Payroll (NFP) report. And currencies can often move hundreds of points per second in reaction to the news.
In Australia, traders stay up past midnight, gladly delaying the start of the weekend as they remain glued to their screens. In London, the lunch hour pubs are deserted as traders eat sandwiches at their desks. And in New York, everyone arrives at the office extra early in order to prepare for the 8:30 a.m. blast off.
Employment data is the lifeblood of modern capitalist economies – more jobs usually means more consumer spending. And in the advanced industrialized nations, consumption makes up as much 75% of the nation’s GDP. This is especially true in the U.S., U.K. and Australia, all of which depend on consumer spending to remain afloat.
|Traders will be watching hourly wages to predict how much consumers have to spend.|
It’s no wonder then that some in the currency markets like to refer to NFPs as the “Super Bowl of Trading.” And much like the actual Super Bowl the report is difficult to handicap.
About 10 years ago – out of sheer curiosity – I combed through 20 months of consensus predictions of NFPs and judged them to be correct if the number came within 20,000 jobs of the actual print. Mind you, that is about a 10% leeway on an average monthly NFP report of 200,000 jobs. And yet with all the computing power of Wall Street – with all the skills of analysts from Goldman Sachs, Morgan Stanley, Citibank and many others – the consensus number was within 10% just 4 put out of 20 months.
This Friday’s report could prove to be especially challenging for financial markets in North America and beyond. This is the final employment result before the much anticipated Federal Reserve rate hike due at the FOMC meeting two weeks later.
The consensus forecast is looking for much of the same, with jobs expected to come in at 165K versus 161K in October and with the unemployment rate holding steady at 4.9%.
Yet this month, the labor data may not be the star of the show: With the vast majority of Americans now gainfully employed, jobs aren’t the biggest issue. Wages are. To that end, traders are much more likely to focus on the average hourly earnings figure, which is expected to rise by 0.2% versus 0.4% the month prior.
But no matter what happens, our members at Calendar Profits Trader are going to get the inside scoop on how to play NFPs … and other important events that move currencies. They get the details on what trades to make and when to make them. And we give them our reasoning in a no-nonsense, jargon-free way. Plus, we always have our members’ backs. So, if you’re looking for ways to profit in currencies, don’t hesitate to check us out.