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News & analysisNews & analysisMarket response to any specific economic data release is far from standard even if actual numbers differ greatly from consensus expectations. Rather the market response is based on context of the current economic situation.
This week’s non-farm payrolls, being one of the major data points in the month, is a great case in point.
There are many factors and of course the key one for you as an individual trader is your chosen vehicle you are trading (and of course direction i.e. long or short for open positions).
The context of today’s impending non-farm payrolls from a market perspective is interest rate expectations going forward. This week the Fed gave the market the expected .25% cut that was already priced into currency, bond and equity market pricing.
The market response however, as this was already priced in, was as a result of the accompanying statement which was not as dovish as perhaps anticipated and a reduction in expectations of a further imminent cut.
From an equity market point of view the result, despite the interest rate cut, was to sell off, whereas from the USD perspective this lessening expectation of further rate cuts was bullish. Perhaps this could be viewed as contrary to what the textbooks would suggest is a standard response.
So, onto today’s non-farm payrolls (NFP) figure…
Logic would suggest that a strong number is good news for the economy, and so should be positive for equities and perhaps bearish for USD. However, as this may be a critical number in the Feds decision making re. interest rate decisions, a strong NFP is likely to have the opposite effect.
A weaker number is likely to be perceived as potentially contributory to thinking that another rate cut may be prudent sooner and so despite on the surface being “bad news”, it would not be surprising to see equities stronger and USD weaker.It remains to be seen of course what the number is and the actual response but is perhaps a lesson in seeing new market information within the potential context of the current economic circumstances and of course incorporate this in your risk assessment and trading decision making.
Mike Smith
Educator
Go Markets
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The articles are from GO Markets analysts based on their independent analysis. Views expressed are of the their own and of a ‘general’ nature. Advice (if any) are not based on the readers personal objectives, financial situation or needs. Readers should therefore consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice.Ready to start trading?
The information provided is of general nature only and does not take into account your personal objectives, financial situations or needs. Before acting on any information provided, you should consider whether the information is suitable for you and your personal circumstances and if necessary, seek appropriate professional advice. All opinions, conclusions, forecasts or recommendations are reasonably held at the time of compilation but are subject to change without notice. Past performance is not an indication of future performance. Go Markets Pty Ltd, ABN 85 081 864 039, AFSL 254963 is a CFD issuer, and trading carries significant risks and is not suitable for everyone. You do not own or have any interest in the rights to the underlying assets. You should consider the appropriateness by reviewing our TMD, FSG, PDS and other CFD legal documents to ensure you understand the risks before you invest in CFDs. These documents are available here.
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