Will NFP affect USD?

What will happen?

On March 4, 2022, the US Bureau of Labor Statistics will publish average hourly earnings, nonfarm employment change (nonfarm payrolls – NFP), and, most importantly, the unemployment rate. This report is usually published monthly, often on the first Friday of the month. Average hourly earnings and nonfarm payrolls don’t include the farming industry’s data due to its seasonality.

The Federal Reserve System (the US central bank) considers all of these indicators when making its decisions, especially the unemployment rate, which represents the overall economic health.

How will it affect the dollar?

The US highest unemployment rate was in May 2020, at the COVID-19 peak. Many people lost their jobs, and the rate went up from 4.4% to 14.7%. Now it’s close to pre-pandemic times. In February 2022, this rate was 4.0%.

On February 4, 2022, the last release was a little higher-than-expected, 4.0% vs. 3.9%. As for NFP, the result was much better than expected, 467K vs. 110K.

Apparently, every release is entirely different from the forecast, which means it’s difficult to make accurate predictions. So, the unemployment rate can influence the US dollar a lot. After the last month’s release, the USD boosted and held high for several days.

How to trade on the NFP release?

If the actual rate is higher than expected, it’s good for currency. However, pay attention to other indicators as well.

This rate can strongly affects the market as the job creation is a leading indicator of consumer spending and, therefore, economic activity in general.