Forex Why can the NFP influence financial markets?

[FXOchartist]

Surely traders already understand about NFP, because this is one of the focuses of global traders when the report is released. Non-farm payroll or NFP is a statistic published by the United States Bureau of Labor Statistics (BLS) every month which provides an overview of the number of workers in the country's non-agricultural sectors.

In the context of economics and financial markets, NFP is a very significant indicator. NFP data releases generally have a big impact on the stock, bond, and forex markets. This is due to the relationship between employment and economic growth.

But how to analyze the NFP report? Referring to the FXOpen blog, there are three important points that traders must pay attention to when analyzing the NFP report, below are these points.

• As Expected: Currency values may experience minimal immediate impact if the report aligns with analyst forecasts, as the anticipated news is already priced into the market.
• Better than Expected: A robust report can boost the US dollar, as higher employment rates suggest economic strength, potentially leading to rising interest rates.
• Worse than Expected: Conversely, weak employment figures can devalue the US dollar, reflecting economic concerns and pressuring policymakers towards accommodative measures.

NFP news can have an impact on financial markets, not only affecting currencies but also the value of stocks and bonds. Actual data that is higher than the forecast is good for the currency, whereas actual data is worse than the forecast and negative for the currency.

How to trade when the NFP is released? According to the FXOpen blog some traders use OCO (One Cancels the Other) orders by placing orders above or below the current price and using stop losses at the top and bottom points, wherever the price breaks, one of the orders will be active. Meanwhile, for execution tactics traders usually use small timeframes such as M1, M2, M5, or M15, and require a platform with speed such as Ticktrader or MT4 and MT5

 

[Asahi]

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