Friday, 8 Oct 2010

Non-Farms Figure Set to Shake Markets Up

Ahead of today's US Non-Farm Payrolls report, the greenback is hanging on to the recent gains made against the euro and UK pound. In the last 24-hours, EUR/USD has fallen over 100 pips, while GBP/USD has tumbled close to 150. The dollar's gains were largely due to the better then predicted US unemployment figure released yesterday. Whether or not today's payrolls number will cause the dollar to stage a downward correction is yet to be seen.

Analysts are predicting a figure of around 1K for the Non-Farms report. If true, it would signal a marked improvement in the US employment situation over last month. August's Non-Farms figure was -54K. While a figure in line with expectations would likely help the greenback in afternoon trading, traders are warned that the Non-Farms figure is notoriously hard to predict. Should the figure fail to meet expectations, the dollar is likely to tumble against its main currency rivals.

In addition, a poor employment figure would likely renew suspicions that the Fed will institute a policy of quantitative easing in order to prevent the US economy from dropping back into recession. Any move by the Fed will likely feed investor fears that the US is not recovering from the economic crisis, and may lead to a prolonged bearish trend for the dollar.