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This Friday’s NFP is important, but it’s not the most

Friday is US Non Farm Payrolls – arguably the most important data release in the calendar. Every month each number takes on a greater significance with the US Federal Reserve looking to start reining in its quantitative easing programme probably from March 2014.

The closer that date looms the more significant each number becomes. Indeed, those numbers have the power to be complete game changers for the forex market. An unusually strong reading and the markets will start to price Fed tapering in as a definite, which would see USD strengthen and hit risk currencies hard. And the opposite if it is a particularly weak number.

By Justin Pugsley, Markets Analyst MahiFX Follow MahiFX on  twitter

This probably means that Q1 2014 numbers will potentially have the biggest impact of all.

For the November figures being released this Friday various surveys suggest 160,000-180,000 jobs were added with the jobless rate falling to 7.2% from 7.3%. A number below 200,000 and within the expected range would not be seen as a game changer in terms of the direction of the USD.

Eagerly awaiting NFP

EURUSD Technical chart December 2013 towards NFP release technical trading currencies

US debt ceiling talks

Hitting an unemployment rate of 6.5% was touted by the Fed as a basis for rethinking its monetary policy. However, that has recently become a bit more complicated. The Fed has started picking up on the low labour participation rate, which is now under 63% and the lowest in decades, and wants to boost it.

So this Friday’s jobs number is important, but probably not the most important one. Before beginning its tapering the Fed will want to be sure that the economy is on a sustainable path to recovery and that the pace of jobs creation is well established.

One factor the Fed will be acutely aware of are the coming wrangles over the US debt ceiling, which will take place in early 2014. This could involve another shut down of the US government along with the usual political posturing along with concerns over its impact on the economy.

If jobs aren’t being created at a significant pace by then – the Fed may once again decide to postpone its tapering for fear that combined with a US government show down it might be too much for the economy to take.

Further reading:  Real reason behind a potential “Dectaper”

Justin Pugsley

Justin Pugsley

MahiFX is headed by David Cooney, former global co-head of currency options and e-FX trading at Barclays Capital and responsible for the award winning e-commerce platform BARX and Susan Cooney, former head of e-FX Institutional Sales in Europe for Barclays Capital. Operating as a market maker, MahiFX provides traders direct access to institutional level execution speeds and spreads through its proprietary-built fully automated pricing and risk management technology, lowering the cost of retail forex trading. MahiFX global operations are headquartered in Christchurch, New Zealand with offices in London, UK with development and support teams in both locations for 24 hour service. The company is regulated by The Australian Securities and Investments Commission (ASIC), Australia’s corporate, markets and financial services regulator. Article by Justin Pugsley, Markets Analyst MahiFX  Follow MahiFX on twitter and on facebook  Disclaimer: This material is considered a public relations communication for general information purposes and does not contain, and should not be construed as containing, investment advice or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. MahiFX makes no representation and assumes no liability as to the accuracy or completeness of the information provided. The use of MahiFX’s services must be based on your own research and advice, and no reliance should be placed on any information provided or comment made by any director, officer or employee of MahiFX. Any opinions expressed may be personal to the author, and may not reflect the opinions of MahiFX, and are subject to change without notice