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The Bureau of Labor Statistics in the US is scheduled to release the Non-Farm Payrolls data this Friday, and the FOMC is expected to take account of the most recent developments in the country’s labour market.
Employment numbers and the job creation rate in the economy are both important determinants of future interest rate policy.
The report will reflect on changes that occurred in the labour market throughout the month of September, which is considered by many market analysts as one of the most critical periods of the fiscal year.
September is the first month after the summer holidays season during which the economy is expected to pick up steam as workers return from their vocations.
If the NFP data does not meet the initial expectations of the market, this could be perceived as a bigger disappointment than it would have been otherwise for any other month of the year. Thus, the US markets are expected to be especially volatile on Friday.
The US economy added 130 000 new jobs in August, and the current forecast is for an additional 140 000 new positions to have been added in September. The unemployment rate was recorded at 3.7 per cent for the third consecutive month in August, which is evocative of the labour market's resilience.
Nevertheless, the labour market is currently operating above its full employment capacity.
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The FOMC has already stated on several occasions that it will not implement any further changes in the interest rate, by the end of the year, unless it discerns strong evidence of waning inflation and rising unemployment.
Therefore, this Friday’s NFP report becomes exceptionally important for future monetary policy, since a potential rise in unemployment coupled with the already observed deterioration of the price stability, would undoubtedly give the Committee a hard time before its next meeting.
As per usual, the US dollar is likely to be the first financial asset to react to the release of the employment data on Friday. The EURUSD is currently trading at around 1.09430, after having tested the major support level at 1.09250 last Friday for the third consecutive time this month.
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