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Welcome to another NFP week! What can you expect from the report? More importantly, how will the dollar react to the release?

NFP-related reports

A brand new month means another chance to trade NFP-related reports!

If you’re one of them newbies then you should know that traders watch the U.S. non-farm payrolls (NFP) because they provide a pretty good gauge of employment trends (and future consumer activity) in the country.

Last month we found out that payrolls had jumped by 263,000 in April, which is way higher than the downwardly revised 189,000 figure in March and the 185,000 increase that many had expected. Heck, it’s the biggest increase since 1969!

Details also showed the unemployment rate slipping from 3.8% to 3.6% thanks in part to labor force participation rate falling 0.2% to 62.8%. Meanwhile, average earnings inched 3.2% higher from a year ago.

Interestingly, the dollar FELL at the release of the positive NFP numbers. Turned out, the earnings growth miss was more important than the headline numbers at the time.

This time around traders expect to see a net addition of another 195,000 for the month of May. Unemployment is expected to maintain its 3.6% reading, while average monthly earnings could improve from 0.2% to 0.3%.

While surprises in headline numbers could move the dollar, you might want to pay more attention to wage growth.

As we’ve seen last month, market players are more interested to see how much buying power existing workers have in the foreseeable future especially since latest U.S. tariff policy changes are expected to raise consumer prices.

Overall market sentiment

We’ve seen from last week’s price action that risk aversion in the markets tend to boost the safe-haven dollar.

This week keep close tabs on policy decisions from major central bankers such as the Reserve Bank of Australia (RBA) and the European Central Bank (ECB).

Dovish remarks could push traders into the arms of the dollar, while more neutral statements could inspire small rallies for the high-yielding currencies.

Meanwhile, trade developments between the U.S. and its major partners could keep the dollar on its toes.

Word around is that Mexico is set to begin high-level talks with the U.S. this week to discuss migration policies. This comes after the POTUS announced an additional 5% tariff on ALL Mexican goods starting June 10 with possibility of higher rates in the next months if Mexico doesn’t take more measures to curb illegal immigration into the U.S.

On the other side of the world, China has officially started upping its tariff collections from about 5% – 10% to around 25% on $60 billion worth of U.S. goods. It’s also planning to publish an “entities list” that could prevent some key U.S. companies from doing business with their Chinese counterparts.

Missed last week’s price action? Read USD’s price recap for (May 27 -31)!