Categories
Fundamental Analysis

US Nonfarm Payrolls Expected to Recover in November Following Weak October Data

US Nonfarm Payrolls

US Nonfarm Payrolls Expected to Recover in November Following Weak October Data

The US Bureau of Labor Statistics (BLS) is set to release the highly anticipated Nonfarm Payrolls (NFP) report for November on Friday at 13:30 GMT. This data will play a pivotal role in shaping expectations for the Federal Reserve’s (Fed) interest-rate policies and the future trajectory of the US Dollar (USD).

November Nonfarm Payrolls Forecast

Economists predict the US economy added 200,000 jobs in November, rebounding from October’s modest gain of 12,000. October’s weak performance was attributed to disruptions caused by hurricanes and the Boeing strike.

The Unemployment Rate (UE) is expected to inch up to 4.2% from October’s 4.1%, signaling a slight softening in the labor market.

Wage growth, as measured by Average Hourly Earnings (AHE), is projected to grow 3.9% year-on-year through November, down from 4.0% in October. On a monthly basis, wage increases are anticipated to slow to 0.2%, following October’s robust 0.4% rise.

The November jobs report will be a key indicator of the US labor market’s health and could significantly influence the Fed’s monetary policy decisions. This comes after Fed Chair Jerome Powell recently adopted a cautious tone on rate cuts, emphasizing the need for careful deliberation despite economic growth and persistent inflation above the 2% target.

Market Analysis Ahead of the Report

Analysts at TD Securities predict a partial recovery in November’s NFP numbers, with approximately 75,000 jobs being added back due to the fading effects of hurricanes and strikes. They also foresee a modest rise in the unemployment rate and cooling wage growth.

Potential Impact on EUR/USD

Market participants are pricing in a 75% chance of a 25-basis-point rate cut later this month, according to the CME Group’s FedWatch tool. However, the upcoming NFP report could shift these expectations:

  • If NFP falls short of 200,000: This could trigger USD selling, reinforcing expectations of Fed easing. In this scenario, EUR/USD may climb toward the 1.0700 level.
  • If NFP exceeds expectations: Strong payroll growth and higher wage inflation could dampen hopes for further rate cuts, strengthening the USD and pushing EUR/USD back toward 1.0400.

Recent data paints a mixed picture. The BLS reported stronger-than-expected JOLTS job openings at 7.744 million for October. Meanwhile, the ADP report revealed private-sector job growth of 146,000 in November, slightly below expectations, raising concerns about labor market softness. However, the ADP figures often show limited correlation with the NFP.

EUR/USD Technical Outlook

Dhwani Mehta, Asian Session Lead Analyst at XtremeMarkets, highlights key technical levels for EUR/USD:

  • Upside Targets: A break above the 21-day Simple Moving Average (SMA) at 1.0560 could pave the way for a rally toward 1.0700. Success at this level may lead to further gains, targeting the 50-day SMA at 1.0761 and the 200-day SMA at 1.0845.
  • Downside Risks: The 14-day Relative Strength Index (RSI) remains below 50, signaling downside risks. If EUR/USD dips below 1.0400, sellers could aim for the November 22 low of 1.0333.

The November NFP report promises to be a pivotal moment for financial markets, influencing both short-term price action and long-term monetary policy expectations.