Forex Today: US Nonfarm Payrolls data to ramp up volatility
Here is what you need to know on Tuesday, December 16:
The US Dollar (USD) starts Tuesday on a steadier note after dipping slightly against major peers on Monday. The day ahead centers on the US Nonfarm Payrolls (NFP) data for October and November, along with November wage inflation and the Unemployment Rate. Markets will also scrutinize October Retail Sales and the preliminary December S&P Global PMI readings.
USD Performance This Month
The table below shows how the US Dollar has moved against key currencies this month. Notably, the USD was weakest against the Canadian Dollar.
USD EUR GBP JPY CAD AUD NZD CHF
USD -1.30% -0.93% -0.84% -1.48% -1.28% -0.80% -0.89%
EUR 1.30% 0.38% 0.45% -0.18% 0.02% 0.51% 0.42%
GBP 0.93% -0.38% 0.33% -0.56% -0.36% 0.12% 0.04%
JPY 0.84% -0.45% -0.33% -0.65% -0.47% 0.03% -0.06%
CAD 1.48% 0.18% 0.56% 0.65% 0.15% 0.70% 0.61%
AUD 1.28% -0.02% 0.36% 0.47% -0.15% 0.49% 0.40%
NZD 0.80% -0.51% -0.12% -0.03% -0.70% -0.49% -0.09%
CHF 0.89% -0.42% -0.04% 0.06% -0.61% -0.40% 0.09%
The heat map illustrates relative percentage changes between major currencies. The base currency is listed in the left column, and the quote currency is across the top row. For example, selecting USD as the base and moving horizontally to JPY yields the USD/JPY percentage change shown in the corresponding cell.
The USD Index slipped roughly 0.15% on Monday as a cautious mood helped cap losses into the session's end. Early Tuesday European trade sees the USD Index hovering just above 98.00, while US stock index futures are trading lower by 0.3% to 0.8%. The Unemployment Rate is forecast to hold at 4.4% in November, and NFP is expected to rise by around 40,000.
EUR/USD remains in a tight range near 1.1750 after modest gains on Monday. Later in Europe, HCOB PMI data for Germany and the Eurozone will feature prominently in the calendar.
GBP/USD also traded flat on Monday and starts Tuesday near 1.3350, with the UK ONS due to publish October employment data at 07:00 GMT.
Canada’s inflation cooled slightly: CPI rose 2.2% year over year in November, below the 2.4% market expectation. USD/CAD stayed range-bound below 1.3800 after Monday’s flat close.
USD/JPY slipped about 0.4% on Monday amid rising expectations for a hawkish BoJ stance. The pair extended losses early Tuesday, trading around 154.83, down about 0.25% on the day.
Australia’s private sector activity expanded in December but at a softer pace than in November, with the S&P Global Composite PMI easing to 51.1 from 52.6. AUD/USD remains under mild downside pressure, trading below 0.6650.
Gold faced a loss of momentum after testing $4,350 and finishing Monday essentially flat. On Tuesday, XAU/USD traded near $4,280, down roughly 0.5% as optimism for a rapid Russia-Ukraine peace agreement cools demand for the precious metal.
Nonfarm Payrolls (NFP) are a key component of the US Bureau of Labor Statistics monthly jobs report. NFP measures the net monthly change in employment excluding farm work.
NFP figures influence Federal Reserve policy by signaling progress toward its two main goals: full employment and 2% inflation. A stronger-than-expected NFP typically supports a higher USD as it suggests more income, spending potential, and potential for higher rates. Conversely, a softer NFP can push traders to expect looser policy.
In practice, higher NFP tends to push the USD higher via higher inflation expectations and tighter monetary policy, while weaker NFP can weigh on the dollar as rate expectations ease.
NFP also tends to inversely affect gold prices. When payrolls beat expectations, the dollar strengthens, reducing gold’s appeal as a non-yielding asset priced in dollars. Higher interest rates linked to strong NFP can further reduce gold’s attractiveness relative to cash holdings.
Keep in mind that NFP is just one piece of the job-market picture. Occasionally, stronger payrolls paired with softer earnings can muddy the signal, and components like the Average Weekly Hours and the Participation Rate can swing interpretation, particularly during unusual periods like the so-called Great Resignation or during major financial crises.
Would you like a quick, layman-friendly explainer of how to interpret NFP data step by step, or a simple checklist to track how NFP releases move markets in real time?
