Nonfarm Payrolls Cheat Sheet: Five scenarios for Gold, Indices and Forex

Economists expect Nonfarm Payrolls to show an increase of 140K jobs in September.
Small deviations from this outcome will likely have a straightforward impact on assets.
A horrible outcome or a leap in job creation may trigger counter-intuitive responses.

Yohay Elam FXStreet

Jobs, jobs, jobs – that is the focus for the Federal Reserve (Fed) and for almost all tradable assets. The release is critical for the next Fed decision, with markets split about whether the bank will cut interest rates by 25 or 50 basis points.

The FXStreet economic calendar points to an increase of 140K jobs, and leading indicators did little to change that perception. There are five scenarios:

1) Within expectations (130K-150K)

If economists nailed it, speculation about the rate cut will continue, and pessimism might eventually win. Why? Fed Chair Jerome Powell cooled expectations for further aggressive moves, the Middle East conflict is intensifying and the enthusiasm from Chinese stimulus has faded.

I expect an initial whipsaw and then for a trend to emerge:

Gold bearish on fading rate cut expectations.
US Dollar bullish on the risk-off mood
Stocks bearish, extending the weekly trend.

2) Moderately above expectations (150-180K)

Stronger job growth may push the Fed toward a smaller rate cut, but that would not be a done deal just yet. The good news is that recession fears are exaggerated. This is a "Goldilocks" scenario, not too hot, nor too cold.

I expect

Gold bearish on rate fears
US Dollar bullish on stronger data.
Stocks bullish on better growth prospects,

3) Significantly above estimates (above 180K)

An excellent jobs report would be great news for the US, but may disappoint markets which want a rate cut.

I expect

Gold bearish on fears of higher rates.
US Dollar bullish to rise on strong data.
Socks bearish, eventually as rate fears could win over economic optimism.

4) Moderately below expectations (100K-130K)

A disappointing jobs report would raise expectations for a 50 bps rate cut, and would cause some worry, but not too much.

In this case,

Gold bullish on falling yields.
US Dollar bearish on weaker data.
Stocks bearish on economic concerns.

5) Significantly below estimates (below 100K)

An increase of fewer than 100K jobs would be alarming, raising concerns of a recession.

I expect

Gold strongly bullish on expectations for lower rates.
US Dollar bullish on safe-haven flows, as fears about the global economy would rise.
Stocks bearish, on fears of a downturn.

For a full preview of Nonfarm Payrolls and other events, see

Seven Fundamentals: Nonfarm Payrolls caps a week packed with market-moving events

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.