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We’ve got the monthly monster U.S. jobs numbers coming this Friday, and if you’re planning on trading the event, then here are the key points you need to know first:

Jobs numbers surprised in August

  • U.S. economy added 1.37 million jobs in August vs. 1.37 million expected
  • August’s net job additions was revised lower from 1.76M to 1.73M
  • The unemployment rate improved from 10.2% to 8.4%, vs. 9.8% expected
  • Average hourly earnings improved from 0.1% to 0.4%

Dollar bulls were given the gift of much better-than-expected, positive employment updates, taking the Greenback higher against all of the majors after the release.

USD's Reaction to the Sept NFP Report
USD’s Reaction to the Sept NFP Report

But USD gave up its intraday gains with no apparent direct catalyst, possibly on profit taking ahead of the London session close. The downside revision to July’s read may have been a factor, as well as the fact that the employment environment is still below pre-pandemic conditions.

Another contributor to the turn may have been likely a return in focus to the continued uncertainty on whether or not we’d see another stimulus bill to support the U.S. economy, which continues to suffer from the pandemic.

Analysts expect more (but slower) job creation in September

  • September headline NFP to reflect a net addition of 800K more jobs
  • September unemployment rate expected to dip from 8.4% to 8.2%
  • September average hourly earnings to improve from 0.4% to 0.5%?

Based on leading indicators, markets expect a slower pace of job creation in September, but do expect an improvement in the average hourly earnings and the unemployment rate.

Markit’s U.S. Flash PMI data reported a solid end to the third quarter, indicating that we did see job growth in both the manufacturing and services sectors, “supported by a faster rise in production at manufacturers, with a further increase in new orders.” But the upside momentum we saw over the past two months seems to be stalling in the services sector, which accounts for roughly 80% of U.S. jobs.

Today’s  ADP report inspired good vibes when private companies added 749,000 net jobs increase in September vs. an estimate of around 600,000 jobs. Since the pandemic started, the ADP number has significantly trailed the government’s report, which suggests that today’s big beat in private payrolls may translate into a much bigger gain on Friday.

And we have yet to see the closely watched ISM manufacturing PMI report as it will be released on Oct. 1st, but an improvement from August’s 46.4% read on the Employment Index will likely drive the odds up further of a better-than-expected read from the government on Friday.

USD may react to more than the headline numbers

If we do see a round of better-than-expected employment updates as the leading indicators suggests, then the dollar may pop higher across the board during the NFP release as traders will likely price in lowered odds of further monetary policy stimulus off of the good news. This is especially a likely reaction if we see a net change well above last month’s addition of 1.37M jobs and/or positive revision to previous month’s numbers.

But last month’s price action has taught us that other factors can quickly take over USD sentiment and reverse the initial move.

For this release, the driving themes of pandemic developments (mainly any fresh news on COVID-19 vaccines/therapies) and whether or not we will see a new U.S. stimulus package will likely be catalysts for volatility and possibly a short-term change of heart in the Greenback.