GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.
Eurozone CFTC EUR NC Net Positions down to €162.8K from previous €1575K
GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.
Japan CFTC JPY NC Net Positions: ¥8.8K vs previous ¥141K
GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.
Japan CFTC JPY NC Net Positions down to ¥88K from previous ¥141K
GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.
Fed’s Barkin: Labour market is steady, but hiring remains uncomfortably narrow
Richmond Fed President Tom Barkin said the decline in the unemployment rate was welcome and described job growth as modest but stable. He also noted that hiring remains concentrated in healthcare and AI, leaving the overall picture uncomfortably narrow, adding that demand still looks healthy, while progress on inflation will take time, keeping upcoming data in focus.
Key Quotes
Drop in the unemployment rate is welcome.
Hard to find firms outside of healthcare or ai who are hiring.
Job growth is modest, very much in line with low-hiring and low-firing continuing.
The narrowness of hiring is “uncomfortable.”
Do not hear the cost of interest being cited as a major problem for businesses.
In theory lower labour supply and lower job growth is a reasonable balance.
Not clear whether the job market will break towards more hiring or more firing.
Do believe there is a change in productivity, not just a data artefact.
Demand growth still seems quite healthy.
Coming data will be important; it is still not trivial that the Fed is still trying to catch up with gaps from the shutdown.
One of the benefits of the Fed system is having regional officials “outside the bubble” of Washington, D.C
On the housing market the real solution is supply; there need to be more houses built.
Jobs data can now be taken at face value.
On inflation, it will take more time to make up for missing reports from last fall.
US Dollar Weekly Forecast: Greenback or Greenland?
The week that was
And we’re off!
Another positive week for the US Dollar (USD) saw the US Dollar Index (DXY) extend a promising start to the new trading year, managing to at least scare away the spectre of being one of the worst-performing currencies during the last year.
In addition to the ongoing strong recovery, the index managed to clear its critical 200-day SMA around 98.85 on Friday, a harbinger of potential extra advances in the relatively short-term horizon.
Adding to the currency’s challenges, Federal Reserve (Fed) officials have maintained a divided stance on the monetary policy outlook, particularly regarding the pace and extent of rate cuts, which has left investors cautious ahead of the upcoming release of US inflation figures tracked by the Consumer Price Index (CPI) on January 13.
The weekly move higher in the Greenback was only accompanied by an equally firm recovery in US 2-year yields, while the belly and the long end of the curve edged lower in that period.
Consensus around the FOMC remains absent
Recent remarks from Federal Reserve officials reflect a growing focus on balancing cooling inflation against emerging labour-market risks, with views diverging on how restrictive policy remains and how quickly rates should be adjusted.
Neel Kashkari (Minneapolis) said inflation is gradually easing but warned that tariff-related pressures could prove persistent, even as the unemployment rate risks rising from current levels, a sign that labour-market weakness could surface before inflation is fully tamed.
Tom Barkin (Richmond) stressed the need for “finely tuned” policy decisions, noting that while inflation has fallen, it remains above target, and unemployment, though historically low, has begun to edge higher. He added that interest rates are now close to neutral.
By contrast, Stephen Miran (FOMC Governor) argued policy is clearly restrictive and called for aggressive rate cuts this year, suggesting more than 100 basis points of easing may be needed to support growth.
So far, implied rates point to just over 53 basis points of easing by year-end and around a 95% chance of an on-hold decision at the January 28 gathering.
The US labour market keeps cooling…or not?
The Greenback found in the latest US Nonfarm Payrolls (NFP) another excuse to extend its robust recovery. Indeed, in December, the US economy added just 50K jobs, a tad below consensus, while the Average Hourly Earnings, a proxy for wage inflation, ticked higher to an annualised 3.8%, and the Unemployment Rate challenged analysts’ opinions after receding to 4.4%.
All in all, a steady cooling of the labour market appears bumpy, to say the least, removing fuel from those who expect job creation to stall somewhat and the jobless rate to tick (dramatically?) lower in order to reignite the thirst for lower rates.
Now, about inflation…
Political noise unlikely to weigh on the buck
After news out of Venezuela over New Year’s Eve, markets have once again found themselves digesting geopolitical headlines, this time sparked by renewed comments from Donald Trump about the US potentially “acquiring” Greenland. The remarks have raised fresh questions about US strategic intentions, relations with Europe, and whether any of this really matters for the Dollar.
Trump has revived the idea of bringing Greenland under US control and, notably, refused to rule out the use of military force. The response from Europe was swift. Denmark’s Prime Minister, Mette Frederiksen, and Greenland’s leader, Jens-Frederik Nielsen, both pushed back firmly, stressing that Greenland’s future is for its people to decide. The island remains an autonomous territory within the Kingdom of Denmark.
Strategically, Greenland’s appeal is not hard to see. Its location is critical, and it is thought to be rich in minerals, oil and natural gas. That said, the economic story is far from straightforward. Oil and gas extraction are banned on environmental grounds, while mining projects have been slowed by regulation and opposition from indigenous communities, meaning any payoff would likely be distant and uncertain at best.
In terms of options, the Trump camp has reportedly floated everything from an outright purchase to a Compact of Free Association, similar to arrangements the US has with some Pacific island states. A military seizure, however, would be a different order of magnitude altogether, an unprecedented move against a close ally that would send shockwaves through NATO and further strain already fragile US–European relations.
For the Greenback, the market impact looks limited for now. Investors are likely to treat the Greenland talk as political noise rather than a genuine shift in policy. Unless it snowballs into a broader diplomatic or trade dispute with Europe or materially alters US fiscal or defence spending plans, the buck’s response should remain muted, with rates, growth and overall risk sentiment still doing the heavy lifting.
What’s in store for the US Dollar
Next week is shaping up to be a particularly interesting one, both on the data front and in terms of Fed speak.
The main focus will be the US CPI inflation release, but investors will be just as attentive to what policymakers say about how those numbers could influence the Fed’s thinking ahead of its next meeting in late January.
Technical landscape
Since bottoming out near 97.70 on December 24, the US Dollar Index (DXY) has embarked on a solid recovery that has not only reclaimed the 99.00 barrier but also left behind its significant 200-day SMA around 98.80.
This latter development paves the way for a potential return to the November 2025 peak at 100.39 (November 21). Once cleared, the index could then attempt a move toward the May 2025 ceiling at 101.97 (May 12).
On the flip side, there is immediate contention on the December floor at 97.74 (December 24). If bears push harder, the DXY could slip back to the 2025 bottom at 96.21 (September 17). The loss of this level could expose the February 2022 valley at 95.13 (February 4), seconded by the 2022 base at 94.62 (January 14).
Momentum signals have strengthened decently: The Relative Strength Index (RSI) approaches the 62 mark, while the Average Directional Index (ADX) near 21 suggests quite a firm trend.
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Bottom line
The US Dollar has found a second wind over the past few days, with momentum clearly swinging back in its favour, at least for now.
Part of that support is coming from a handful of Fed officials who are sticking to a hawkish line, helping to steady the Greenback in the near term.
Policymakers seem especially focused on the labour market at the moment, watching closely for any signs of weakness. But inflation hasn’t gone away. Price pressures are still running hotter than the Fed would like, and if they prove stubborn, officials may be forced to pivot back towards fighting inflation sooner than markets expect.
That would point to a more cautious Fed and a firmer Greenback, regardless of the political backdrop.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
GBP/CAD steady as markets digest mixed Canada employment report
The Canadian Dollar (CAD) trades little changed against the British Pound (GBP) on Friday, with GBP/CAD struggling to find direction as traders show a muted reaction to Canada’s latest employment report. At the time of writing, the pair trades around 1.8636, hovering near one-month highs.
Data released by Statistics Canada showed that Net Change in Employment rose by 8.2K in December, beating market expectations for a 5K decline, but easing sharply from November’s 53.6K gain. Meanwhile, the Unemployment Rate climbed to 6.8% from 6.5%, coming in above forecasts of 6.6%.
Wage growth also showed signs of cooling. Average Hourly Wages increased 3.7% YoY in December, down from 4.0%.
From a monetary policy perspective, the mixed jobs report is unlikely to materially alter near-term expectations for the Bank of Canada (BoC). Markets widely expect the central bank to keep interest rates on hold through much of 2026.
Although some analysts had pointed to the possibility of a rate hike toward year-end, the latest labour-market data, marked by rising unemployment and cooling wage growth, complicates that outlook and reinforces the case for a prolonged wait-and-see stance.
At its December meeting, the BoC left its policy rate unchanged at 2.25%, noting that the current setting is “about the right level.” Traders now look ahead to Canada’s inflation data due later this month, which could help shape near-term expectations for monetary policy.
In the United Kingdom, attention is turning to next week’s key economic releases, including labour-market data due on Tuesday and the monthly Gross Domestic Product (GDP) report for November scheduled for Thursday.
From a broader perspective, the interest-rate differential between the BoC and the Bank of England (BoE) continues to favour the Pound, keeping GBP/CAD tilted to the upside.
Meanwhile, the Canadian Dollar is also sensitive to the evolving oil backdrop. Washington’s expanding oversight of Venezuelan oil flows has raised expectations of higher global supply, reinforcing oversupply risks that could cap Oil prices and weigh on the Loonie, given Canada’s status as a major energy exporter.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
XRP trades under pressure amid weak retail demand
Ripple (XRP) is trading under pressure, resting squarely on support at $2.00 at the time of writing on Friday. The path with the least resistance appears downward, weighed down by declining retail demand despite minor inflows into XRP spot Exchange Traded Funds (ETFs).
An expanded outlook of the crypto market suggests growing uncertainty, evidenced by a lack of investor confidence. The Crypto Fear & Greed Index is at 27 on Friday, confirming that investors remain worried.
Despite the index rising to 55 on Tuesday, the market failed to gain strength, leading to the ongoing correction. If sentiment fails to improve, XRP could extend the correction to $2.00 and possibly toward the December low at $1.77.
XRP struggles as retail demand remains weak
The XRP derivatives market is slowly shedding gains made since January 1, when the futures Open Interest (OI) expanded from $3.33 billion to $4.55 billion on Tuesday.
CoinGlass data shows the OI, representing the notional value of outstanding futures contracts, has declined to $4.15 billion on Friday, indicating that retail demand is softening. A steady decline in OI suggests that traders are losing confidence in XRP, which leaves prices vulnerable to selling pressure.
As retail demand gradually dwindles, institutional interest is back on track, as reflected by the XRP spot ETFs recording nearly $9 million in inflows on Thursday. SoSoValue data shows that the ETFs broke their record of steady inflows on Wednesday, with outflows totaling $41 million that day. The resurgence of inflows could be a signal that institutional interest in US-listed ETFs will continue.
XRP technical outlook: XRP holds key support as risk-off sentiment persists
XRP is trading at $2.10 at the time of writing on Friday as investors extend risk-aversion measures. The 100-day Exponential Moving Average (EMA) caps the upside at $2.22, while the 200-day EMA at $2.34 holds slightly below a descending trendline that has been hindering breakouts since the record high of $3.66 in July.
The Relative Strength Index (RSI) at 54 on the daily chart continues to extend its decline from overbought territory, indicating that bullish momentum is faltering.
Conversely, traders may consider leaning into risk, given that the Moving Average Convergence Divergence (MACD) indicator has maintained a buy signal since January 1, which could prevent further declines below the 50-day EMA at $2.07.
A sustained breakout above the 100-day EMA and the 200-day EMA resistance cluster at $2.22-$2.34 could increase the odds of XRP rising beyond the descending trendline toward the $3.00 level.
Crypto ETF FAQs
An Exchange-Traded Fund (ETF) is an investment vehicle or an index that tracks the price of an underlying asset. ETFs can not only track a single asset, but a group of assets and sectors. For example, a Bitcoin ETF tracks Bitcoin’s price. ETF is a tool used by investors to gain exposure to a certain asset.
Yes. The first Bitcoin futures ETF in the US was approved by the US Securities & Exchange Commission in October 2021. A total of seven Bitcoin futures ETFs have been approved, with more than 20 still waiting for the regulator’s permission. The SEC says that the cryptocurrency industry is new and subject to manipulation, which is why it has been delaying crypto-related futures ETFs for the last few years.
Yes. The SEC approved in January 2024 the listing and trading of several Bitcoin spot Exchange-Traded Funds, opening the door to institutional capital and mainstream investors to trade the main crypto currency. The decision was hailed by the industry as a game changer.
The main advantage of crypto ETFs is the possibility of gaining exposure to a cryptocurrency without ownership, reducing the risk and cost of holding the asset. Other pros are a lower learning curve and higher security for investors since ETFs take charge of securing the underlying asset holdings. As for the main drawbacks, the main one is that as an investor you can’t have direct ownership of the asset, or, as they say in crypto, “not your keys, not your coins.” Other disadvantages are higher costs associated with holding crypto since ETFs charge fees for active management. Finally, even though investing in ETFs reduces the risk of holding an asset, price swings in the underlying cryptocurrency are likely to be reflected in the investment vehicle too.
EUR/JPY appreciates above 183.60 on generalised Yen weakness
The Euro appreciates sharply on Friday, reaching session highs above 183.60 after bouncing from three-week lows at 182.63, to retrace most of the weekly losses. The Yen drops across the board amid concerns about tensions with China and market uncertainty about the timing of the Bank of Japan’s (BoJ) next rate hike.
On the macroeconomic front, data from Japan released earlier on Friday showed that household spending bounced back, with a 2.9% yearly increase in November, following a 3% contraction in October and beating market expectations of a 0.9% decline.
Beyond that, November’s preliminary Leading Economic Index improved to 110.5, its highest level since July last year, pointing to steady economic growth. The impact of these figures on the Yen, however, has been marginal.
In the Eurozone, mixed German data have failed to provide any significant fundamental support to the Euro. German Industrial Production rose 0.8%, against market expectations of a 0.4% decline. The Trade Balance surplus, on the other hand, narrowed to €13.1 billion, against expectations of a €16.5 surplus, weighed by a 2.5% decline in exports, which has raised concerns about the outlook of a trade-oriented economy.
Later on Friday, Eurozone Retail Sales are expected to show that consumption ticked up 0.1% in November after a flat reading in October, although the highlight of the day is the US NFP report and the Supreme Court’s ruling on Trump’s tariffs.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
trade-oriented
Nonfarm Payrolls set to grow moderately in December as markets assess Fed rate cut bets
The United States (US) Bureau of Labor Statistics (BLS) will release the Nonfarm Payrolls (NFP) data for December on Friday at 13:30 GMT.
The US Dollar (USD) will likely experience heightened volatility as the employment report could provide key clues about how the Federal Reserve (Fed) will approach policy-making in the new year.
What to expect from the next Nonfarm Payrolls report?
Economists expect Nonfarm Payrolls to rise by 60,000 in December following the 64,000 increase recorded in November. In this period, the Unemployment Rate is seen edging lower to 4.5% from 4.6%, while the annual wage inflation, as measured by the change in the average hourly earnings, is forecast to tick up to 3.6% from 3.5%.
The monthly report published by the Automatic Data Processing (ADP) showed that private sector payrolls rose by 41,000 in December following the 29,000 decline recorded in November. Additionally, the Employment Index of the Institute for Supply Management’s Services Purchasing Managers’ Index (PMI) climbed to 52 after staying in contraction territory, below 50, for six consecutive months.
Previewing the employment report, TD Securities analysts said: “We look for job gains to stabilize at around the 50k mark over the last two months, with private payrolls printing a 50k gain in December as the government likely shed 10k jobs over the same period.”
“We also expect the unemployment rate to normalize to 4.5% after seeing a shutdown-driven jump to 4.6% in November. Avg. hourly earnings likely rose 0.3% m/m and 3.6% y/y,” they added.
How will the US December Nonfarm Payrolls data affect EUR/USD?
The US Dollar ended the year on a bullish note and kept its footing to begin 2026. Although the Fed adopted a dovish stance at the December policy meeting, market participants see a strong chance of the US central bank to hold the interest rate unchanged at the January meeting. According to the CME FedWatch Tool, investors are currently pricing in a less than 15% chance of a 25 basis points rate cut this month.
Nevertheless, the employment data could still influence the odds of a rate cut in March, which currently stands around 45%, and trigger a significant market reaction.
Earlier in the week, Richmond Federal Reserve Bank President Thomas Barkin said rate decisions will need to be “finely tuned,” given risks to both unemployment and inflation goals. Barkin noted that the unemployment remains low, but added that they don’t want the job market to deteriorate further. Meanwhile, Minneapolis Fed President Neel Kashkari said that the job market is clearly cooling and added there is a risk the Unemployment Rate can “pop from here.”
Rabobank analysts note that the market will be looking to fine-tune its expectations regarding the timing of the next Fed rate cut.
“Currently, the consensus expects steady policy to be maintained this month. Indeed, in view of the split within the FOMC, market pricing suggests risk of steady policy potentially into the spring. A soft payrolls report this week would undermine the USD. That said, we would expect the USD to again exhibit safe haven behaviour this year meaning the potential of support for the greenback. On balance, choppy trading seems likely as the market digests this year’s various events,” they explain.
A significant upside surprise in NFP, with a reading above 80,000, combined with a drop in the Unemployment Rate, could cause investors to lean toward another policy hold in March and boost the USD with the immediate reaction. In this scenario, EUR/USD could come under heavy bearish pressure heading into the weekend. Conversely, a disappointing NFP print of 30,000 or less could trigger a USD sell-off and allow EUR/USD to turn north.
Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD:
“The Relative Strength Index (RSI) indicator on the daily chart dropped below 50 for the first time since late November and EUR/USD closed below the 20-day SMA for four consecutive days, reflecting a buildup of bearish pressure. In case the pair drops below the 100-day Simple Moving Average (SMA), currently located at 1.1665, and confirms that level as resistance, technical sellers could remain interested. In this scenario, 1.1600 (round level) could be seen as an interim support level before 1.1560 (200-day SMA).”
“On the upside, 1.1740 (20-day SMA) acts as dynamic resistance. If EUR/USD manages to stabilize above this level, it could gather recovery momentum and target 1.1800 (static level, round level), followed by 1.1870 (static level).”
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.