Nonfarm Payrolls (NFP) in the US rose by 256,000 in December, the US Bureau of Labor Statistics (BLS) reported on Friday. This reading followed the 212,000 increase (revised from 227,000) recorded in November and surpassed the market expectation of 160,000 by a wide margin.
Other details of the report showed that the Unemployment Rate edged lower to 4.1% from 4.2%, while the Labor Force Participation remained steady at 62.5%. Finally, annual wage inflation, as measured by the change in the Average Hourly Earnings, declined to 3.9% from 4%.
The change in total nonfarm payroll employment for October was revised up by 7,000, from +36,000 to +43,000, and the change for November was revised down by 15,000, from +227,000 to +212,000. With these revisions, employment in October and November combined is 8,000 lower than previously reported," the BLS noted in its press release.
Market reaction to US Nonfarm Payrolls
The US Dollar (USD) gathered strength with the immediate reaction to the upbeat Nonfarm Payrolls data. At the time of press, the USD Index was trading at its highest level since November 2022 at 109.90, rising 0.7% on the day.
What to expect from the next Nonfarm Payrolls report?
Economists expect the Nonfarm Payrolls report to show that the US economy added 160,000 jobs in December after witnessing a stellar 227K job gain in November as distortions caused by two hurricanes and the Boeing strike faded.
The Unemployment Rate (UE) is expected to remain at 4.2% in the same period.
Meanwhile, Average Hourly Earnings (AHE), a closely-watched measure of wage inflation, are expected to rise by 4% year-over-year (YoY) in December, at the same pace as seen in November.
Investors will assess the December jobs data for fresh signs on the health of the US labor market, as they remain wary about the inflation and monetary policy outlook under Trump’s presidency. Incoming Trump’s immigration and trade policies are expected to stoke up inflation, calling for higher interest rates.
The Minutes of the Fed’s December meeting released on Wednesday showed policymakers’ concerns about inflation and the potential impact of Trump’s policies, suggesting that they will move more slowly and cautiously on interest rate cuts because of the uncertainty.
How will US December Nonfarm Payrolls affect EUR/USD?
Speculations around Trump's potential tariff plans continued to offset any impact from the recent US economic data releases. However, that failed to alter the market’s pricing of a no-rate change decision at the Fed meeting later this month.
The Automatic Data Processing (ADP) announced on Wednesday that employment in the US private sector grew by 122,000 jobs last month, lower than the estimated 140,000 and November’s 146,000 job gain. The disappointing ADP jobs report ramped up expectations of a weak payrolls data on Friday. However, the US ADP data is generally not correlated with the official NFP data.
If the headline NFP figure shows a payroll growth below 100,000, the US Dollar could witness a massive selling wave in a knee-jerk reaction to the data, as it would create a dilemma for the Fed and could revive dovish Fed expectations. In such a scenario, EUR/USD could stage a solid comeback toward the 1.0450 level.
On the other hand, an upside surprise to the NFP and wage inflation data could double down on the Fed’s hawkish shift, sending the USD back to multi-year highs while knocking off the EUR/USD pair to the lowest level in over two years to below 1.0250.
“EUR/USD remains below all major daily Simple Moving Averages (SMA) in the lead-up to the NFP showdown. Meanwhile, the 14-day Relative Strength Index (RSI) points south below the 50 level. These technical indicators suggest that the pair remains exposed to downside risks in the near term.”
“Buyers needs a decisive break above the 21-day Simple Moving Average (SMA) at 1.0391 to initiate a meaningful recovery toward the January 7 high of 1.0437. The next relevant topside target aligns at the 50-day SMA at 1.0510. Fresh buying opportunities will rise above that level, calling for a test of the December 6 high of 1.0630. Conversely, if EUR/USD yields a sustained break of the two-year low at 1.0224, additional declines will aim for the 1.0150 psychological barrier.”
Comments