US July Nonfarm Payrolls Preview: Analyzing major pairs' reaction to NFP surprises

  • Nonfarm Payrolls in US is expected to rise by 870,000 in July
  • There is a strong correlation between surprising NFP prints and major pairs' immediate movements.
  • Investors are likely to react to a disappointing NFP more strongly than a positive reading.    

The US Bureau of Labor Statistics (BLS) will release the July jobs report on Friday, August 6. Following an increase of 850,000 in June, investors expect Nonfarm Payrolls to rise by 870,000 in July and see the Unemployment Rate edging lower to 5.7% from 5.9%.

The monthly data published by the Automatic Data Processing (ADP) Research Institute revealed on Wednesday that employment in the private sector rose by 330,000 in July with the pace of job gains in the service sector slowing down considerably. This reading missed the market expectation of 695,000 by a wide margin and could be taken as a sign that the NFP could fall short of the market consensus as well.

The general market view is that a positive surprise in the NFP reading is likely to help the greenback outperform its rivals and vice versa.

In order to understand how impactful the US jobs report is on the USD’s market valuation, we analyzed the market reaction of four major pairs, EUR/USD, GBP/USD, USD/JPY and AUD/USD, to the previous 13 NFP prints. We omitted the older NFP figures because we believe the numbers registered during the coronavirus outbreak created extreme outliers and distorted the results. 


The FXStreet Economic Calendar assigns a deviation point to each macroeconomic data release to show how big the divergence was between the actual print and the market consensus. The -3.51 deviation seen in April's NFP reading could be assessed as a relatively big negative surprise. On the other hand, February’s NFP print of 536,000 against the market expectation of 182,000 was a positive surprise with the deviation posting 1.76 for that particular release.

Next, we plotted the reaction, in terms of pips, of the major pairs mentioned above 15 minutes, one hour and four hours after the release to see if the general market view held. 

Finally, we calculated the correlation coefficient (r) to figure out which major pair had the strongest correlation at which time frame. When r approaches -1, it suggests there is a significant negative correlation, while a significant positive correlation is identified when r moves toward 1. 


There were seven negative NFP surprises against six positive surprises in the previous 13 releases. On average, the deviation was -0.8 on disappointing prints and 0.726 on upbeat figures. 15 minutes after a negative surprise, the average gains in the EUR/USD, GBP/USD and AUD/USD were 19.4, 19.3 and 20.5 pips, respectively, while USD/JPY lost 15.8 pips. On the other hand, EUR/USD, GBP/USD, USD/JPY and AUD/USD rose 3.5, 9, 3.3 and 8.5 pips, respectively, on average following positive surprises. These findings suggest that investors are more likely to react immediately to weaker-than-expected NFP prints rather than strong ones. 

15-min deviation table

60-min deviation table

240min deviation table


EUR/USD has a correlation coefficient of -0.77, -0.46 and -0.48 15 minutes, 60 minutes and 240 minutes after the release, respectively. These numbers suggest that the impact of the NFP deviation on EUR/USD fades away following a strong reaction initially.


GBP/USD has a correlation coefficient of -0.6, -0.16 and -0.49 15 minutes, 60 minutes and 240 minutes after the release, respectively. These numbers suggest that there is a relatively strong inverse correlation with the pip-change in GBP/USD and the NFP deviation 15 minutes after the release. However, this correlation is virtually non-existent one hour after the release as presented by the flattening trend line seen in the respective chart.


USD/JPY has a correlation coefficient of 0.85, 0.6 and 0.46 15 minutes, 60 minutes and 240 minutes after the release, respectively. These numbers suggest that the NFP deviation has a strong positive correlation with the pip-change in USD/JPY 15 minutes and one hour after the release. 


AUD/USD has a correlation coefficient of -0.56, -0.15 and -0.47 15 minutes, 60 minutes and 240 minutes after the release, respectively. These numbers suggest that the inverse correlation with the pip-change in AUD/USD and the NFP deviation 15 minutes after the release is weaker than it is for EUR/USD and GBP/USD. Similar to GBP/USD, AUD/USD shows no interest in the NFP print one hour after the release.


To summarize, a negative NFP surprise triggers a stronger market reaction than a positive one in EUR/USD, GBP/USD, USD/JPY and AUD/USD pairs. There is a significant correlation between the NFP deviation and pip-change in these pairs immediately after the data release. One hour later, the correlation weakens noticeably in these pairs with the exception of USD/JPY. Four hours after the release, it's difficult to draw a connection between these pairs' movements and the NFP reading.

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