Forex Today: US Dollar retreats ahead of critical April employment data
Here is what you need to know on Friday, May 2:
After reaching its highest level in three weeks near 100.40 on Thursday, the US Dollar (USD) Index corrects lower to start the European session on Thursday. The US Bureau of Labor Statistics will publish April employment data, which will feature wage inflation, Unemployment Rate and Nonfarm Payrolls figures. Earlier in the day, the European economic calendar will offer preliminary Harmonized Index of Consumer Prices (HICP) data, the European Central Bank's (ECB) preferred gauge of inflation, for April.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.39% | 0.08% | 1.13% | -0.38% | -0.31% | 0.42% | -0.12% | |
| EUR | -0.39% | -0.37% | 0.71% | -0.79% | -0.81% | 0.02% | -0.54% | |
| GBP | -0.08% | 0.37% | 1.10% | -0.41% | -0.46% | 0.38% | -0.16% | |
| JPY | -1.13% | -0.71% | -1.10% | -1.47% | -1.39% | -2.09% | -0.99% | |
| CAD | 0.38% | 0.79% | 0.41% | 1.47% | -0.05% | 0.80% | 0.26% | |
| AUD | 0.31% | 0.81% | 0.46% | 1.39% | 0.05% | 0.83% | 0.25% | |
| NZD | -0.42% | -0.02% | -0.38% | 2.09% | -0.80% | -0.83% | -0.54% | |
| CHF | 0.12% | 0.54% | 0.16% | 0.99% | -0.26% | -0.25% | 0.54% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Despite mixed macroeconomic data releases from the US, the USD outperformed its rivals on Thursday on growing optimism about a de-escalation of the US' conflict with its trading partners. The US Department of Labor reported that weekly Initial Jobless Claims climbed to 241,000 from 223,000 in the previous week. Other data showed that the ISM Manufacturing Purchasing Managers' Index (PMI) edged lower to 48.7 in April from 49 in March but came in above the market expectation of 48. Meanwhile, Bloomberg reported that China Commerce Ministry said that the US has taken the initiative to convey to China that the US is hoping to talk on trade.
EUR/USD closed in negative territory for the third consecutive day on Thursday before stabilizing above 1.1300 in the European morning on Friday. The annual HICP inflation in the Eurozone is forecast to soften to 2.1% from 2.2% in March.
Gold lost more than 1% on Thursday and came within a touching distance of $3,200. XAU/USD stages a rebound and rises about 0.5% on the day at around $3,250.
GBP/USD lost 0.4% on Thursday and dropped to 1.3260. The pair holds its ground in the European morning and trades near 1.3300.
USD/JPY gained more than 1.5% on Thursday and extended its weekly rally to a fresh multi-week high near 146.00 in the Asian session on Friday. The pair edges lower toward 145.00 amid renewed USD weakness in the European trading hours. Japanese Prime Minister (PM) Shigeru Ishiba said on Friday that there is no change at all to their stance of requesting the US to cancel tariffs.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
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