July non-farm payroll preview

Today NFP report for the month of July is to be published at 12:30 GMT from the U.S.

What is NFP report?

• NFP or non-farm payroll report is the monthly statistics on labor condition in the US released by US department of labor statistics. The report comprises goods, construction and manufacturing sector companies.
• This report influences the financial markets deeply across asset class.

Key highlights –

• Last month report was a blockbuster with 287,000 gains.
   
• Change in private payroll has been 265,000 last month. Today expected 173,000.
   
• Total payrolls are expected at 180,000.
   
• The most vital component is wage growth, which only recently has started showing some strength. Today it is expected to rise by 0.2 percent on a monthly basis and 2.6 percent annually.
• Labor force participation rate still weak at 62.7 percent.
   
• The unemployment rate is expected to remain at 4.8 percent.
   
• The underemployment rate is expected to fall further from current 9.6 percent.

Impact –

• Volatility is sure to be on the card, post release.
   
• Any number above 200,000 would be considered as very good and investors will gain back some of their lost confidence with regard to the resilience of the U.S. economy. Naturally rate hike bets for December likely to move up.
   
• While number below 150,000 will pose serious doubts over the strength of the labor market if wage growth drops too.

Better than expected wage growth would be key for Dollar’s strength. Any wage growth above 3 percents will bring the focus on faster rate hikes. Better payroll can also boost sentiment for equities.

We, over the period, expect weakness in Dollar as current hike path isn’t sustainable to Dollar’s strength.

Dollar index is currently trading at 95.56, -0.23 percent so far today.