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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”