Forex Today: US Dollar remains within weekly range ahead of employment data
Here is what you need to know on Friday, September 5:
The action in financial markets quiet down early Friday as investors stay on the sidelines ahead of the highly-anticipated August employment report from the US, which will feature Nonfarm Payrolls (NFP), Unemployment Rate and wage inflation figures. Statistics Canada will publish August jobs data as well.
The US Dollar (USD) Index edged higher in the second half of the day on Thursday but lost its traction to close the day with small gains as risk flows dominated the action in the American session. The data from the US showed that the Institute for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) improved to 52 in August from 50.1 in July. This print came in better than the market expectation of 51. Meanwhile, the Automatic Data Processing (ADP) reported that private sector payrolls rose by 54,000 in August, falling short of analysts' estimate of 65,000.
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 strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.20% | 0.31% | 0.84% | 0.46% | 0.16% | 0.37% | 0.57% | |
| EUR | -0.20% | 0.11% | 0.57% | 0.26% | -0.04% | 0.16% | 0.37% | |
| GBP | -0.31% | -0.11% | 0.36% | 0.15% | -0.15% | 0.05% | 0.31% | |
| JPY | -0.84% | -0.57% | -0.36% | -0.32% | -0.67% | -0.45% | -0.24% | |
| CAD | -0.46% | -0.26% | -0.15% | 0.32% | -0.29% | -0.10% | 0.16% | |
| AUD | -0.16% | 0.04% | 0.15% | 0.67% | 0.29% | 0.20% | 0.46% | |
| NZD | -0.37% | -0.16% | -0.05% | 0.45% | 0.10% | -0.20% | 0.26% | |
| CHF | -0.57% | -0.37% | -0.31% | 0.24% | -0.16% | -0.46% | -0.26% |
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).
In the European morning on Friday, the USD Index fluctuates in a tight range above 98.00. Nonfarm Payrolls in the US are forecast to increase by 75,000 in August and the Unemployment Rate is seen ticking up to 4.3% from 4.2% in July. In the meantime, US stock index futures were last seen rising between 0.15% and 0.45%. US President Donald Trump said late Thursday that his administration would impose 100% tariffs on semiconductor imports from firms not moving production to the US.
The UK's Office for National Statistics (ONS) reported early Friday that Retail Sales rose by 0.6% on a monthly basis in July. This print followed the 0.3% increase recorded in June and came in better than the market expectation of 0.2%. This data failed to trigger a noticeable reaction in GBP/USD, which was moving sideways at around 1.3450 at the time of press.
After closing marginally lower on Thursday, EUR/USD holds its ground and trades in positive territory above 1.1650.
USD/JPY struggles to build on Thursday's gains and declines toward 148.00 in the European session on Friday. US President Trump signed an executive order implementing his trade agreement with Japan, which calls for a maximum 15% tax on most of Japan's imports, including automobiles and parts.
USD/CAD stays in negative territory at around 1.3800 after closing the previous four trading days higher. The Unemployment Rate in Canada is expected to edge higher to 7% in August.
Gold corrected from the record-high it set above $3,570 but found support before testing $3,500. XAU/USD holds steady at around $3,550 in the European morning on Friday.
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.
