US dollar, USD/JPY, gold performance around Nonfarm payrolls (NFP)

Despite Fed members pushing back on imminent rate cuts, markets are taking much greater notice of softer economic data form the US to keep prospects of a June cut alive. The US dollar delivered its second worst day of the year following Wednesday’s soft ISM services report, which expanded at its slowest pace in three months, new orders were lower, employment contracted further and prices paid expanding at their slowest pace since March 2020.

If this is to be coupled with a refreshingly weak NFP report on Friday, all bets are likely on for the Fed to cut by 25bp in June. And if the Fed cut, it paves the way for other central banks to ease – which could prompt another round of risk on trade.

However, looking at NFP job growth figures since the pandemic reveals that estimates tend to be on the pessimistic side.

The chart shows that NFP job growth figures remain positive but have been steadily trending lower since the 2021 peak as the cycle loses steam. The prospect of a slower economy certainly excites dovish market participants who want to see the Fed cut rates, yet it should be remembered that the Fed only tend to cut when something breaks – and like it or not, job growth is still expansive. In fact, we could say that the softening of job growth plateaued in 2023, so it is interesting to note that job growth is picking up again in recent months.

Furthermore, NFP job growth tens to bear estimates more often than not looking at recent data:

Nonfarm job growth since June 2020:

NFP jobs has exceeded estimates 67.4% of the time
The previous NFP figure has been upwardly revised 54.3% of the time
Yet despite this, the current NFP figure has only beaten the prior print 45.7% of the time (which makes sense, as job growth has been trending lower)

How the US dollar index has performed around Nonfarm payrolls (NFP):

The charts above look at the performance of the US dollar index on the day of NFP, and the three days either side of it. As NFP is always released on a Friday (T+0) it becomes easy to match patterns to days of the week.

Wednesday and Thursday prior to NFP have generated negative returns (average and median)
NFP day (Friday), and the following Monday and Tuesday have seen positive returns (average and negative
The following Wednesday tends to produce average and median negative returns
High-to-low range on the day is 0.87%, and its trend is pointing higher

How gold has performed around Nonfarm payrolls (NFP):

Gold has performed well on the Thursday ahead of NFP
Yet it has averaged negative returns on NFP day and the following Monday
Interestingly, median returns for gold have been positive for all days except the following Tuesday, since June 2020
The daily high-low % average is 1.79%

How USD/JPY performed around Nonfarm payrolls (NFP):

The performance on USD/JPY has essentially tracked the US dollar index around NFP, making it an ideal market for traders without access to DXY
NFP day has provided the strongest average and median returns
USD/JPY ha also provided positive average returns the following Monday and Tuesday (median returns are also positive for the following Wednesday)
The daily high-low average is 1.05%, and its trend is pointing higher to denote increasing volatility around the event

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.