Non-Farm Payrolls may provide a bitter disappointment in the May 2019 report – FXStreet Surprise Index


  • The Non-Farm Payrolls reports for May 2019 is set to rock markets.
  • The FXStreet Surprise Index has been showing a deterioration in US data.
  • Looking at historic data, the next top indicators may provide even worse surprises.

Fed Chair Jerome Powell has sent a subtle hint that he may be open to cutting interest rates – and his sign may become a reality if the jobs report disappoints. 

Powell cited low inflation and uncertainty as reasons to "act as appropriate." He did not mention the job market, which has been robust throughout the economic recovery. However, employment – which is one of the Fed's mandates – may disappoint. 

According to the FXStreet Surprise Index, the frequency and severity of negative surprises in the US have been intensifying. 

Examining all incoming US data, from top-tier figures such as Non-Farm Payrolls, via second-tier numbers like factory orders and including also low-tier data such as the Challenger job cuts, shows that figures have badly missed – the level of negative surprises has broken below the previous low. 

The index stands at -155 after falling below the round -150 level. Here is how it looks on the chart:

NFP FXStreet Surprise Index for the NFP June 7 2019

Taking a look only top-tier and second-tier economic measures while discarding low-tier figures – thus providing a more precise outlook for the NFP – we see that the FXStreet Surprise Index has pierced below a double bottom.

After breaking below -201 that was touched twice, the index is already at -221. According to technical analysis textbooks, a clear breach of a double-bottom implies a rapid fall.

We may now see an acceleration to the downside that may come as early as the jobs report for May, due on June 7th:

NFP FXStreet Surprise Index for the NFP June 7 2019 top tier macro events

If the NFP indeed misses expectations, chances of a rate cut may rise, and the US Dollar may lose further ground.

About the FXStreet Surprise Index

FXStreet Surprise Index quantifies, in terms of standard deviations of data surprises (original releases vs. survey median), the extent to which economic indicators exceed or fall short of consensus estimates.  

Economic reports with better- or worse-than-expected news are assigned a positive or negative deviation value, while reports meeting expectations get a 0 deviation value. Adding up the values of the deviations, and you get an initial series showing how economic data are progressing relative to the consensus forecasts of market economists. The deviation formula employs a ratio function to replicate behavioral anchors of market participants.

Preserving the properties of these underlying series, the index finally shows the detrended momentum of the surprises in relation to previous weeks. 

Surprise Indexes are constructed for the United States, Euro Area, Germany, United Kingdom, Canada, Japan, Australia, and New Zealand.

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD's range play continues ahead of Eurozone Consumer Confidence

EUR/USD remains directionless despite the drop in the US treasury yields. An above-forecast Eurozone Consumer Confidence will likely push the pair higher to the trendline falling from June highs. 

EUR/USD News

GBP/USD sits at 2-month tops ahead of key Brexit talks

Fresh optimism surrounding the Brexit deal propels GBP/USD to a two-month high. Brexit talks between the EU's chief negotiator Michel Barnier and UK Brexit Secretary Stephen Barclay will be the key.

GBP/USD News

USD/JPY: Bears eyeing break below 107.45

USD/JPY trades modestly flat, with the bias leaning to the downside, as we wind down into the close for the week following a data-heavy number of sessions which have left more questions unanswered and the outlook murky. 

USD/JPY News

Markets unmoved by Fed cut and pause

The Federal Reserve’s latest twist in monetary policy, reducing the fed funds for a second time in two months and then pausing for instructions has left markets without a clear direction on interest rates. Equites ended mixed.

Read more

Gold holds on to recovery gains amid trade/political pessimism

In addition to bouncing off multi-month-old rising trend-line, Gold gains support form recently downbeat trade/political headlines while taking the bids to $1,500 during Friday’s Asian session.

Gold News

Forex Majors

Cryptocurrencies

Signatures