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Tomorrow at 1:30 pm GMT Uncle Sam will print its non-farm payrolls (NFP) numbers for the month of February.

What are traders expecting and how can the event affect the dollar’s current trends against its counterparts?

Here are points you need to know first:

What happened last time?

  • January NFP up by 225K vs. 160K expected
  • January unemployment rate inched higher from 3.5% to 3.6%
  • January average hourly earnings up by 0.2% vs. 0.3% forecast
  • December NFP revised higher from 145K to 147K

While the headline NFP printed better than markets had expected, traders were mostly not happy about the higher unemployment rate and sluggish earnings growth.

Luckily for Greenback bulls, COVID-19 worries continued to dominate market sentiment.

USD 15-Minute Forex Charts
USD 15-Minute Forex Charts

News of 41 cruise ship passengers in Yokohama testing positive for the disease highlighted concerns that the outbreak will do much more economic damage to China than previously expected. The dollar quickly recovered its post-NFP dip on the flight to safe havens.

What are traders expecting this time?

  • February headline NFP to slow down to 190K
  • February unemployment rate to remain at 3.6%
  • February average hourly earnings could pick up by 0.3%

Analysts expect February’s labor market numbers to reflect the economy’s strength before COVID-19 concerns eventually reduce service sector activity and hiring plans in general.

For now, the unseasonably mild weather is expected to boost hiring at construction sites and leisure and hospitality industries, enough to boost February’s data to around January’s numbers.

What are the leading indicators saying?

Indicators are pretty mixed, but it still kinda lines up with current market expectations.

See, the employment component of ISM’s manufacturing PMI improved by 0.3% and noted that panelists were “generally cautious” over future employment potential.

ISM’s non-manufacturing PMI employment saw a 2.5% increase, with notes that “human resources is working off” order backlog from the previous months.

Markit’s manufacturing PMI didn’t reflect such strength. The report noted slower employment growth as “higher future output did not translate into faster job creation.”

Markit’s services PMI didn’t fare much better. The report showed employment growth slipping to its weakest pace since November as uncertainty over global economic growth and the coronavirus outbreak weighed on new order demand.

Last but not the least is the ADP report, which printed 183,000 jobs private payrolls increase when markets had only seen a 170,000 uptick. You should note, however, that January’s numbers were revised down from 291,000 to 209,000. Yikes!

How will the report affect USD’s intraweek trends?

A quick look at USD’s 7-day price performance showed the currency losing ground to AUD, EUR, CHF, and JPY and erasing most of its gains against CAD, GBP, and NZD.

For newbies out there, you should know that the dollar’s weakness mostly came from the Fed pulling a surprise 50 basis point interest rate cut on Tuesday.

That was the first unscheduled rate cut since the financial crisis, yo!

The stimulus should have assured the (equities) markets if the move also hadn’t revealed the Fed’s concern about the current and future impact of COVID-19 concerns on economic activity.

In addition to that, the Fed’s decision also put the dollar at a disadvantage in interest rate differentials.

If this week’s NFP data print much stronger than markets are expecting, then maybe markets will think that the Fed’s rate cut is enough to keep the economy afloat in the next few months.

But if the numbers disappoint, then traders will jump on the worry train and expect further rate cuts from Governor Powell and his gang.