Breaking: US Nonfarm Payrolls rise by 311,000 in February vs. 205,000 expected

The data published by the US Bureau of Labor Statistics (BLS) revealed on Friday that Nonfarm Payrolls rose by 311,000 in February. This reading came in much higher than the market expectation of 205,000 and followed January's print of 504,000 (revised from 517,000).

Further details of the jobs report showed that the Labor Force Participation Rate improved modestly to 62.5% from 62.4% in January. Additionally, the Unemployment Rate rose to 3.6% and the annual wage inflation, as measured by the Average Hourly Earnings, increased to 4.6% from 4.4%.

Market reaction

Despite the strong-than-expected NFP reading, the US Dollar Index came under renewed bearish pressure with the initial reaction and was last seen losing 0.4% on the day at 104.85.

Follow our live coverage of market reaction to the US jobs report.

Investors could be assessing the improvement in the Labor Force Participation Rate and the increase in the Unemployment Rate as factors that could allow the US Federal Reserve to hike the policy rate by 25 basis points (bps) in March. In fact, the CME Group FedWatch Tool's probability of a 50 bps hike at the next policy meeting declined to 40% after the jobs report. Earlier in the week, this probability was as high as 77% after FOMC Chairman Jerome Powell noted that they could increase the pace of rate hikes if warranted by the data.

Market participants are likely to wait for next Tuesday's Consumer Price Index (CPI) report for February before confirming the Fed's next policy step.

Meanwhile, the benchmark 10-year US Treasury bond yield is down more than 2% on the day at around 3.8%.

• Nonfarm Payrolls report is expected to show a job addition of 205,000 in February.
• US Dollar may be affected by critical data, which may show a 4.7% increase in year-over-year Average Hourly Earnings for workers.
• The Bureau of Labor Statistics is set to report an Unemployment Rate of 3.4% in February.

The Nonfarm Payrolls (NFP) data will be released by the Bureau of Labor Statistics (BLS) this Friday at 13:30 GMT. The NFP release is expected to show job gains of 205,000. However, another positive surprise cannot be ruled out, which could strengthen the renewed upside in the US Dollar (USD).

The US Dollar caught a fresh bid wave and resumed its recovery, following the hawkish comments delivered by Chairman of the Federal Reserve (Fed) Jerome Powell, in his bi-annual testimony earlier this week.

He said that “if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.” He added that the "ultimate level of interest rates" is likely to be higher than previously anticipated as well. While that justifies the resurgent US Dollar demand, the further upside hinges on another strong Nonfarm Payrolls headline number.

What to expect in the next Nonfarm Payrolls report?

Friday's United States (US) economic docket highlights the release of the closely-watched US monthly jobs report data for February. And, the Nonfarm Payrolls expectations are that the economy added 205K jobs during the reported month, down from the stunner 517K in January. The Unemployment Rate is expected to remain unchanged at 3.4% in the second month of this year. 

Investors will also pay close attention to the Average Hourly Earnings, especially after the January US Consumer Price Index (CPI) and the Fed’s preferred inflation gauge, the Core PCE Price Index, came in hotter than expected.

It’s worth mentioning that on the state of the United States labor market, Powell said that "overall data on the labor market shows it is extremely tight and contributing to inflation."

Analysts at Commerzbank are bullish on the US labor market and expect another solid jobs report: “Although much lower job gains are to be expected for February, at 240K they should be far from weak. Such an increase in employment would be noteworthy because the US labor market is already extremely tight with an unemployment rate of 3.4%, the lowest since 1969, and this figure is unlikely to have changed in February. Accordingly, we expect the report to support expectations for further rate hikes. We forecast a 25 bps hike at each of the Fed's next three meetings.”

When will be US February Nonfarm Payrolls report released and how could it affect EUR/USD?

The Nonfarm Payrolls report is scheduled for release at 13:30 GMT, on March 10. With the US Dollar reaching a fresh three-month high, courtesy of heightened expectations for a 50 basis points (bps) March Fed rate hike, the EUR/USD pair is languishing in weekly lows below the 1.0600 psychological mark. Stronger US employment details could provide additional legs to the ongoing advancements in the USD, throwing the major pair deeper into losses.

On the other hand, a weaker-than-expected NFP print could trigger a sharp correction in the USD, as it would squash expectations of bigger rate increases by the Fed and an eventual higher terminal rate. The market repricing of the Fed rate hike outlook could reinstate US Dollar bearish trades, initiating a potential turnaround in the EUR/USD pair.

Dhwani Mehta, Analyst at FXStreet, offers a brief technical overview and outlines important technical levels to trade the EUR/USD pair: “The main currency pair is extending its three-day recovery momentum from two-month lows of 1.0524 heading into the NFP showdown. The pair faces strong resistance at the downward-sloping 21-Daily Moving Average (DMA) at 1.0634 once the 1.0600 mark is reclaimed. The next significant resistance levels are seen at the weekly high of 1.0694 and 1.0720 (the flattish 50 DMA).”

“However, the recent upside in the EUR/USD pair appears shortlived, as the 14-day Relative Strength Index (RSI) still remains below the midline, despite the latest uptick. Therefore, on renewed selling, the pair could change course and retest the bullish 100 DMA support at 1.0533, below which a fresh drop toward the 1.0500 level could be in the offing. The last line of defense for Euro bulls is envisioned at 1.1483, the year-to-date low,” Dhwani adds.

Nonfarm Payrolls related content

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About the Nonfarm Payrolls report

The Nonfarm Payrolls report, published by the US Bureau of Labor Statistics, lists all new jobs created in nonfarm sectors over the previous month. 

Job market data is strongly linked to the monetary policy of the US Federal Reserve, which can cause large fluctuations in financial markets. The NFP number is released alongside revisions to data from previous months, which are also closely watched by currency and stock traders. 

Better-than-expected readings are generally considered favorable (or bullish) for the US Dollar, while worse-than-expected numbers are considered negative (or bearish) for the Greenback. The Unemployment Rate and Average Hourly Earnings numbers are often just as important as the NFP headline.

When will the next United States Nonfarm Payrolls take place?

United States Nonfarm Payrolls is taking place on Friday, April 7th at 12:30 GMT.

Stay tuned to all the upcoming events that may affect the markets on our economic calendar.