Forex Today: US Dollar consolidates losses as attention turns to Nonfarm Payrolls data
Here is what you need to know on Friday, December 6:
The US Dollar (USD) holds its ground early Friday after weakening against its major rivals on Thursday. Investors await November jobs report, which will include Nonfarm Payrolls (NFP), Unemployment Rate and wage inflation figures. The US economic calendar will also feature the University of Michigan's Consumer Sentiment Index. Finally, several Federal Reserve (Fed) policymakers will deliver speeches on the last day before the blackout period starts.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | -0.09% | 0.03% | 0.32% | 1.31% | 1.07% | -0.18% | |
| EUR | -0.00% | -0.13% | 0.03% | 0.33% | 1.40% | 1.07% | -0.16% | |
| GBP | 0.09% | 0.13% | 0.13% | 0.46% | 1.54% | 1.20% | -0.06% | |
| JPY | -0.03% | -0.03% | -0.13% | 0.30% | 1.32% | 1.07% | -0.26% | |
| CAD | -0.32% | -0.33% | -0.46% | -0.30% | 1.14% | 0.75% | -0.51% | |
| AUD | -1.31% | -1.40% | -1.54% | -1.32% | -1.14% | -0.33% | -1.57% | |
| NZD | -1.07% | -1.07% | -1.20% | -1.07% | -0.75% | 0.33% | -1.22% | |
| CHF | 0.18% | 0.16% | 0.06% | 0.26% | 0.51% | 1.57% | 1.22% |
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).
The USD Index came under bearish pressure and lost more than 0.5% on Thursday. In the European morning, the index stays in a consolidation phase below 106.00. Meanwhile, the benchmark 10-year US Treasury bond yield fluctuates below 4.2% and US stock index futures trade mixed. Following the 12,000 increase recorded in October, NFP is forecast to rise by 200,000 in November.
After climbing to a new record high above $100,000 on Thursday, Bitcoin reversed its direction and close the day in negative territory. Early Friday, BTC/USD trades at around $98,000.
EUR/USD benefited from the broad-based USD weakness on Thursday and came within a touching distance of 1.0600. The pair edges slightly lower in the European morning on Friday but holds comfortably above 1.0550. Eurostat will publish revisions to third quarter Gross Domestic Product data.
GBP/USD gathered bullish momentum and climbed to its highest level in three weeks above 1.2770 on Thursday. The pair trades marginally lower on the day slightly below 1.2750 to begin the European session.
After rising for three consecutive days, USD/CAD reversed its direction and fell more than 0.3% on Thursday. The pair holds steady above 1.4000 early Friday. Statistics Canada will publish labor market data for November later in the day.
USD/JPY edges lower and trades below 150.00 after posting small losses on Thursday. The data from Japan showed on Friday that Overall Household Spending declined by 1.3% on a yearly basis in October. This reading came in better than the market expectation for a decrease of 2.6%.
Gold failed to capitalize on the selling pressure surrounding the USD and ended the day in the red on Thursday. After falling to its weakest level in over a week below $2,620 in the Asian session, XAU/USD gained traction and was last seen trading near $2,640.
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.
