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Welcome to the first U.S. non-farm payrolls (NFP) release of 2021!

Tomorrow at 1:30 pm GMT Uncle Sam will print its labor market numbers for the month of December.

What are market geeks expecting and how can you make pips from the release?

Here are some useful points to know:

Dollar shrugged off a weak NFP read

  • November employment up by 245K vs. 440K consensus
  • November unemployment rate down from 6.9% to 6.7%
  • November average hourly earnings speeds up from 0.1% to 0.3%
  • October NFP reading revised lower from 638K to 610K

The headline NFP missed analysts’ expectations (by a lot!) as hiring slowed down amidst rising coronavirus cases and some local governments placing light restrictions to slow the virus’ spread.

The dollar wasn’t bothered, though, thanks to traders pricing in their vaccine and stimulus expectations.

It ended the day higher against its major counterparts except for the Loonie which got boosts from Canada’s strong jobs numbers and higher oil prices.

USD 15-min Forex Charts
USD 15-min Forex Charts

Markets see bleaker numbers in December

  • December headline NFP could drop from 245K to 112K
  • December unemployment rate could remain at 6.7%
  • December average hourly earnings to slow down from 0.3% to 0.1%

Traders are expecting more hiring slowdown in December as rising coronavirus cases and lockdown restrictions limit the employers’ activities and the employees’ job hunting.

Leading indicators are mixed…so far

The closely watched ADP report printed its first decline in eight months earlier this week, showing a 123K drop when markets had expected a 170K jump.

Meanwhile, the employment component of ISM’s manufacturing PMI went back to expansion territory after contracting in November. Respondents noted that backlog and strong new orders can mean continued expansion in Q1 2021.

USD may take cues from broader market themes

This week’s FOMC meeting minutes release noted that labor market conditions are still “a long way” from the Committee’s goals.

Add to that voting member Richard Clarida’s talks about low unemployment not being a “sufficient trigger for policy action” and now traders believe that, unless we see huge hits or misses in this week’s numbers, then we probably won’t see sustained intraday trends for the dollar.

Today’s ISM services PMI and initial jobless claims should help paint a clearer picture of the labor market in December.

Meanwhile, don’t forget to include broader market themes like additional “stimmy” prospects and political stability in the U.S. when drafting your trading plans!