Forex Today: Nonfarm Payrolls benchmark revisions, FOMC Minutes to drive USD action
Here is what you need to know on Wednesday, August 21:
The US Dollar (USD) holds its ground against its major rivals early Wednesday as markets wait for the US Bureau of Labor Statistics to announce the preliminary benchmark revisions to Nonfarm Payrolls. Later in the American session, the Federal Reserve will release the minutes of its July 30-31 monetary policy meeting.
The USD Index clings to modest recovery gains near 101.50 early Wednesday after losing 1% since the beginning of the week. The benchmark 10-year US Treasury bond yield fluctuates at around 3.8% after losing nearly 2% this week and US stock index futures trade marginally higher following the mixed action seen in Wall Street on Tuesday.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.85% | -0.59% | -1.20% | -0.46% | -1.09% | -1.60% | -1.22% | |
| EUR | 0.85% | 0.19% | -0.28% | 0.40% | -0.33% | -0.91% | -0.40% | |
| GBP | 0.59% | -0.19% | -0.63% | 0.18% | -0.52% | -1.03% | -0.59% | |
| JPY | 1.20% | 0.28% | 0.63% | 0.66% | 0.07% | -0.30% | -0.18% | |
| CAD | 0.46% | -0.40% | -0.18% | -0.66% | -0.65% | -1.06% | -0.79% | |
| AUD | 1.09% | 0.33% | 0.52% | -0.07% | 0.65% | -0.43% | -0.07% | |
| NZD | 1.60% | 0.91% | 1.03% | 0.30% | 1.06% | 0.43% | 0.39% | |
| CHF | 1.22% | 0.40% | 0.59% | 0.18% | 0.79% | 0.07% | -0.39% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Gold benefited from the broad-based USD weakness on Tuesday and climbed to a new record-high of $2,531. XAU/USD seems to have entered a consolidation phase midweek and was last seen trading in a narrow channel slightly above $2,510.
Inflation in Canada, as measured by the change in the Consumer Price Index (CPI), softened to 2.5% on a yearly basis in July from 2.7% in June, as expected, Statistics Canada reported on Tuesday. USD/CAD's losses remained limited following this report and the pair closed the day modestly lower. Early Wednesday, USD/CAD holds steady above 1.3600.
AUD/USD extended its uptrend and closed the fourth consecutive trading day in positive territory on Tuesday. The pair stays relatively quiet and moves up and down in a narrow channel near 0.6750 in the European morning. In the Asian trading hours on Thursday, preliminary August Judo Bank Manufacturing and Services PMI data from Australia will be watched closely by market participants.
EUR/USD preserved its bullish momentum and rose above 1.1100 for the first time in 2024 on Tuesday. The pair stages a downward correction but manages to stay afloat above 1.1100 in the early European session on Wednesday.
GBP/USD advanced to its highest level in over a year, above 1.3050 on Tuesday. The pair edges lower in the European morning and was last seen trading near 1.3020.
USD/JPY registered losses for the third consecutive trading day on Tuesday before staging a rebound. At the time of press, the pair was up nearly 0.5% on the day, trading a few pips below 146.00.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
