This is a guest post by Becky Ashley
Online FX trading and global data can be at times, intertwined. The ability to unravel these figures and react accordingly is a valuable investing skill set. The data from the latest December 3rd Non-Farm Payroll results certainly provides food for investing thought.
The Non-Farm payrolls signify the culmination of statistical research logged by the U.S Bureau of Labor Statistics and act as a valuable resource for forex trading. The research represents the total number of paid U.S workers, excluding farm employees, nonprofit employees, government employees and private household employees. These exclusions reflect only a small proportion of the US labor market with the report still offering data for approximately 80% of the US workforce. The sheer extent of labor covered by the report re-enforces the importance of this data as a statistical source.
From a forex perspective the unemployment rates within this report may have an impact on a dollar currency pairing, because a country’s level of unemployment is a key indicator of economic prosperity and the Gross Domestic Product. The latest report catalogued a slight rise in the level of unemployment from 9.6% of the labor market to 9.8%. Federal Reserve Chairman Ben Bernanke re-enforced growing concern surrounding unemployment by stating that job creation is the most important problem faced by the American economy.
When considering this data from an investing context, market anticipation plays a key role in measuring the impact of this information. Economists surveyed by Dow Jones Newswires forecast that the unemployment rate would remain constant, staying at the previous months 9.6%. The change in unemployment rates moved against some predicted forecasts – leading forex traders to speculate on market movements.
This unemployment data can also shift into a wider economic and political picture. The lower the unemployment rates, the more likely the Federal Reserve is to seek economic stimulus. We have already seen this in the form of previous quantitative easing initiatives. Obama’s administration has warned that the impending expiration of long- term jobless benefits could impact consumer spending within the holiday season, further weakening economic prosperity. The price of this economic weakening may lead to the loss of more jobs and a decrease in the value of the dollar. The Forex markets provide traders with an outlet to react to this dark shadow of employment figures.
Please ensure that you understand all risks prior to investing. The material above does not contain (and should not be construed as containing) investment advice or an investment recommendation.
Forex trading involves significant risk and may not be appropriate for all investors.