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NFP Preview: Will the jobs report exacerbate inflation concerns?

Fawad Razaqzada Fawad Razaqzada 05/03/2021
NFP Preview: Will the jobs report exacerbate inflation concerns? NFP Preview: Will the jobs report exacerbate inflation concerns?
NFP Preview: Will the jobs report exacerbate inflation concerns? Fawad Razaqzada
After Thursday’s brutal sell-off for growth stocks, brace yourself for more volatility as the latest US monthly nonfarm jobs report is scheduled to be released later in the day at 13:30 GMT.

With bond yields rising rapidly, the focushas turned to inflation – something which the Fed Chair Jay Powell said won’t allow to overcook at his eagerly-anticipated speech on Thursday. His remarks caused stocks to extend their falls as the markets speculated this might mean tighter monetary conditions. With record government and central bank stimulus already in circulation and with investors anticipating a strong recovery in the coming months owing to the rollout of Covid vaccines, inflation is expected to accelerate. Thursday’s decision by the OPEC+ to keep oil output steady through April rather than increase it by 500K barrels per day as was widely expected, caused crude prices to rise sharply. If oil prices remain higher, this will only add to the inflationary pressures.

With that in mind, the focus will also be on the wage-inflation aspect of today’s jobs report. It the report reveals an above-forecast showing for wage inflation, then this may cause stocks to fall further and accelerate the dollar recovery.
 
Expectations
 
  • Headline NFP is expected to print 197K vs. 49K previous
  • Unemployment rate is expected unchanged at 6.3%
  • Average Hourly Earnings again seen rising +0.2% m/m
 
The headline jobs number will also be important to watch, but with some of the pre-NFP leading indicators disappointing expectations, it may come in below forecasts. However, if it is unexpectedly strong, then this may mean good news for the dollar but bad news for stocks as it would increase speculation about tighter monetary conditions.
 
Pre-NFP leading indicators
 
  • ISM services PMI employment component fell 2.5 points to 52.7 from 55.2 last
  • ISM manufacturing PMI employment component rose 1.8 points to 54.4 from 52.6 last
  • ADP private payrolls printed 117K vs. 203K expected
 
NFP trade idea

With risk assets dropping recently, we favour looking for bullish setups on the dollar against risk-sensitive commodity currencies such as the Australian dollar, in the event that jobs and/or wages come in ahead of expectations.

NFP Webinar

Make sure to join us for a 30-minute webinar before the release of the US Non-Farm Payroll report, at 11:30 GMT. In the webinar, we will discuss how the US dollar, gold and indices might react to the jobs and wages data; highlight key levels to watch and provide actionable trade ideas. Register HERE.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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