Non-farm payroll “NFP in forex” is a report that cause big price movement, and create volatility in foreign exchange market.
In general, Non-Farm Payroll (NFP) is a measurement of the economy, and the number of jobs that are not related to farming in the United States of America.
This makes it different from the unemployment rate, which measures only those who do not have jobs but are actively looking for them.
Non-farm payroll (NFP) is usually released on the first Friday of every month by the Bureau of Labor Statistics (BLS).
It’s one of the most important indicator that point to how well or poorly the U.S. economy is doing and whether it’s expanding or contracting.
The non-farm payroll (NFP) figure also gives traders valuable information about how markets will react to these new numbers and what they can expect in coming weeks or months.
So, if you are a newbie or an advance trader who is willing to learn about Non-Farm Payroll (NFP), and how it can help your trading strategy, then keep reading.
What Does Non-Farm Payroll (NFP) Mean In Forex
The Non-Farm Payroll (NFP) is a monthly report that announces the US economy. It’s importance come from the idea that the US economy is 70% consumer spending (when people buy stuff), and consumer spending is driven by people having jobs.
If people have jobs, they have money to spend. In the report, Non-Farm Payroll is the number of jobs added per month.The figure is usually around 200,000 but in the last few years, it has been below for most months.
In fact, it has been under 100,000 for some months. The US federal reserve watch this number closely. So if the number of jobs is falling, the federal reserve might cut interest rates, and if the number is rising, they might raise interest rates.
How Does Non-Farm Payroll (NFP) Affect Forex?
Non-farm payroll is an economic indicator that measures how many people are employed in United State of America. The more people who have jobs, and are contributing to the economy, the stronger the country’s economy.
Non-farm payroll (NFP) is also one of the most important indicators that point to how well or poorly the U.S. economy is doing and whether it’s expanding or contracting.
Exports and imports play a key role in the economy, and trade balance. A healthy non-farm payroll figures indicate that the demand for goods and services in the U.S. economy is on the rise.
This means that consumers are spending more; businesses are hiring more people, and demand for imports is also on the rise. A strong non-farm payroll figure is also good news for the U.S. dollar, because it means that the Federal Reserve will most likely increase interest rates to prevent the economy from overheating.
High interest rates makes the U.S. dollar more attractive to investors, and make it stronger against other currencies.
How Is Non-Farm Payroll Measured?
The non-farm payroll figure is derived from the employment portion of the U.S. Department of Labor’s monthly jobs report. The BLS surveys 140,000 businesses and government agencies is to determine how many people are employed in the country.
If a business is not involved in farming; like manufacturing or service industries, thier employees are included in the non-farm payroll figures. There are two numbers that represent the non-farm payroll figure, which are;
- The change in total employment
- The total employment figures
The former indicates the difference between the employment figures for the current month and the previous month.
The later represents the total number of people who are employed in the country. Both are important because they show how well the economy is doing, and how it can impact your trading.
What Pairs Get affected by Non-Farm Payroll
The non-farm payroll figures are usually released at 8:30 am EST. At this time, news wire are abuzz with the latest economic data, and its impact on various global forex markets.
While all currencies are likely to be impacted by the non-farm payroll figures, the following pairs are likely to be the most sensitive;
USD/CAD: The Canadian dollar is impacted the most, by the non-farm payroll figures. It’s used as a gauge of the overall health of the U.S. economy.
A healthy non-farm payroll indicates that the U.S. economy is growing, and there is more demand for Canadian products. If the non-farm payroll figure is low, it indicates that the U.S. economy is contracting and that there is less demand for Canadian products.
USD/CHF: The Swiss franc is another major currency that is sensitive to the non-farm payroll figures. The franc is often referred to as a safe-haven currency because it is not tied to any specific commodity or economy.
That makes it an attractive investment during economic uncertainty. Therefore, any news that indicates an economic slowdown in the U.S. will impact the value of the franc.
NZD/USD: The New Zealand dollar is another key currency that gets affected by the non-farm payroll figures. The New Zealand dollar is tied to the performance of the growing economies in Asia, which are some of the largest importers of goods produced in New Zealand.
Therefore, a healthy non-farm payroll figure indicates that New Zealand’s economy is doing well and the demand for its goods is rising.
How To Trade Non-Farm Payroll (NFP)
Forex traders can trade the non-farm payroll report in two ways. They can trade the actual number or the expected number.
Traders usually do one or both of these before the report comes out. They monitor the dollar index and the financial markets to get an idea of how they expect the report to come out.
These expectations are what traders look at when they trade the NFP. They either go long or short based on the expectation of how the dollar will react to the news, and there are many different ways to trade the NFP.
- Traders can go long if they expect the dollar to go up when the report comes out.
- Traders might go long if they expect a good report that the dollar will rise.
- Traders can go short if they expect the dollar to go down when the report comes out.
- Traders might go short if they expect a bad report that the dollar wil fall.
Who Releases Non-Farm Payroll News?
The non-farm payroll figures are released by the BLS every first Friday of every month. The BLS is a U.S. government agency responsible for collecting economic data and maintaining the official employment statistics. It accessible through various news wires such as Bloomberg and Reuters.
These news wires often publish the non-farm payroll figures in real time, providing traders with valuable information that can help them make better trading decisions.
Websites like “Trading Central” also publish the latest economic data so that traders can stay up to date with the latest figures. Such websites also provide analysis of the economic data and insights into how it can impact various forex markets.
It’s important to remember that Non-Farm Payroll (NFP) doesn’t directly impact the value of the dollar. It’s only serve as an indicator of how the US economy is doing.
This report could be beneficial for traders that want to trade dollar against the other currencies.