Upcoming Release of US June Nonfarm Payrolls Data: What Impact Will It Have on the Market?

On July 7th, the United States will release the non-farm payroll report for June. Economists predict an increase of 225,000 jobs in June, with the unemployment rate expected to drop to 3.6%. If the non-farm data exceeds expectations, it will raise the probability of future interest rate hikes by the Federal Reserve and could potentially boost the US dollar.

This Friday, the US Bureau of Labor Statistics will release data on non-farm payrolls and the unemployment rate for May, revealing the latest situation in the US labor market.

According to Bloomberg data, economists predict a gain of 225,000 jobs in June, marking the smallest increase since the end of 2020. Additionally, the unemployment rate for June is expected to decline to 3.6%, while average hourly wages are projected to grow by 4.2% year-on-year, potentially setting a record for the smallest annual increase in two years.

However, considering that non-farm data has exceeded expectations in 13 out of the past 14 months, the market may once again face a "reality check."

【Source：MacroMicro】

If the non-farm data surpasses expectations this time, it will strengthen the probability of a 25 basis point interest rate hike by the Federal Reserve in July. According to the FedWatch tool from CME Group, the current probability of a 25 basis point rate hike in July stands at 88.7%.

【Source：CME 】

Morgan Stanley expects a significant slowdown in monthly job growth this year, with replacement rates falling below 90,000 in the fourth quarter. By January of next year, they anticipate a bottoming out at 40,000 before gradually rebounding to reach 72,000 jobs per month.

As an important indicator of the US economy, non-farm payroll data triggers significant market volatility upon its release.

The data shows that since 2023, the average volatility of the S&P 500 index in response to non-farm payroll data is 1.62%, which is higher than the impact of the CPI inflation report.

【Source：Mitrade】

Taking the data released last month as an example, the US added 339,000 non-farm jobs in May, surpassing the market expectation of 195,000 jobs. However, the unemployment rate increased significantly from 3.4% to 3.7%, reaching a new high since October 2022.

After the data was announced, there was little fluctuation in US stock futures, the US dollar index rose more than 10 points in the short term, and spot gold declined by approximately $4. The concerns about economic recession in the market cooled down, and as a result, US stocks ended up rising by 1.45%.

It is evident that strong non-farm payroll data reinforce expectations of a rate hike by the Federal Reserve, subsequently boosting the US dollar. As for the stock market, the impact of non-farm payroll data is more complex. Stock prices may decline due to expectations of a rate hike or rise due to robust economic performance.

Currently, the US dollar index is consolidating around the key level of 103. The 5-day moving average has crossed over the 20-day moving average, indicating a balanced market between bulls and bears. It is expected to continue trading within a range before the release of non-farm payroll data. The resistance level is expected to be around 104.5, while the support level is at 101.8.

【Source：TradingView】