Forex Today: July Nonfarm Payrolls data to keep volatility high heading into weekend
Here is what you need to know on Friday, August 1:
Markets turn quiet early Friday as investors assess the latest headlines surrounding the United States' (US) trade regime, while gearing up for the July employment report, which will feature Nonfarm Payrolls, Unemployment Rate and wage inflation figures. The European economic calendar will offer Eurozone inflation data and later in the day the ISM will publish the US Manufacturing PMI report for July.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 2.86% | 1.73% | 1.87% | 1.10% | 2.21% | 2.42% | 2.06% | |
| EUR | -2.86% | -1.13% | -0.93% | -1.73% | -0.64% | -0.44% | -0.79% | |
| GBP | -1.73% | 1.13% | 0.00% | -0.60% | 0.50% | 0.70% | 0.35% | |
| JPY | -1.87% | 0.93% | 0.00% | -0.76% | 0.28% | 0.51% | 0.32% | |
| CAD | -1.10% | 1.73% | 0.60% | 0.76% | 1.07% | 1.31% | 0.96% | |
| AUD | -2.21% | 0.64% | -0.50% | -0.28% | -1.07% | 0.20% | -0.15% | |
| NZD | -2.42% | 0.44% | -0.70% | -0.51% | -1.31% | -0.20% | -0.34% | |
| CHF | -2.06% | 0.79% | -0.35% | -0.32% | -0.96% | 0.15% | 0.34% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The US Dollar (USD) Index continued to stretch higher following Wednesday's impressive rally and registered gains for the sixth consecutive day. The index is up nearly 2.5% this week and remains on track to register its biggest one-week gains since September 2022. The White House announced late Thursday that the US will set a baseline tariff rate of 10%. Meanwhile, US President Donald Trump signed an Executive Order increasing the tariff rate on Canadian imports from 25% to 35%, while extending the current trade agreement with Mexico for 90 days. The USD Index stays in a consolidation phase at around 100.00 in the European morning and US stock index futures lose between 0.3% and 0.4%. Nonfarm Payrolls in the US are forecast to increase by 110,000 in July.
Canada’s Prime Minister Mark Carney said they are disappointed with the US on the fresh tariff rate. "While negotiations continue with the US, Canada is focused on what we can control; that is on the Building Canada Strong campaign," he added. USD/CAD stretches higher early Friday and trades at its strongest level since late May above 1.3860.
Following a sharp decline that lasted for three days, EUR/USD found a foothold on Thursday and closed the day virtually unchanged. The pair stays in a consolidation phase above 1.1400 in the European morning.
GBP/USD extended its weekly slide on Thursday and ended the day in negative territory. The pair struggles to gather recovery momentum early Friday and fluctuates at around 1.3200.
USD/JPY rose nearly 1% on Thursday and climbed above 150.00 for the first time since early April. The pair stays relatively quiet in the European session and trades near 150.50. Japanese Finance Minister Katsunobu Kato on Friday alarmed over the foreign exchange (FX) moves, including those driven by speculators. Kato further stated that he will need to closely monitor impact on US tariffs on exports.
Gold failed to gather bullish momentum after rising above $3,300 and ended the day marginally higher on Thursday. XAU/USD moves sideways at around $3,290 on Friday.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.