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Trading in financial markets involves significant risk of loss which can exceed deposits and may not be suitable for all investors.
Before trading, please ensure that you fully understand the risks involved
Trading in financial markets involves significant risk of loss which can exceed deposits and may not be suitable for all investors. Before trading, please ensure that you fully understand the risks involved

Non-Farm Payrolls (NFP)

Non-farm payrolls (NFP) figures can be used to build an effective CFD trading strategy. Learn about how they can impact your trade here.

What are non-farm payrolls?

The US Department of Labor publishes the non-farm payrolls, or "NFPs," as an official statistic, often on the first Friday of each month.

Along with the US unemployment rate, the non-farm payrolls measure the number of people who are employed in the US. Both are crucial benchmarks that traders and analysts use to gauge the state of the US economy. The non-farm payrolls, which exclude the agricultural, local government, private home, and not-for-profit sectors, count the number of persons employed in all enterprises across the nation.

The non-farm payrolls are regarded as one of the most reliable indicators of the state of the US economy since they can provide information about upcoming significant data releases, including manufacturing and gross domestic product (or "GDP") figures. This is due to the fact that a country's economic output might be predicted to be stronger at the end of the quarter and vice versa depending on how many people are employed there.

In contrast, consistently strong data on a month-to-month basis could show a strengthening economy, possibly even indicating that the economy may be out of danger of entering a recession. For instance, consistently declining non-farm payroll figures could indicate weakness and the risk of a potential recession.

Before the non-farm payrolls announcement is made public, analysts provide projections with a projected number. The markets may be caught off guard when the payroll data beat or miss projections when they are released, which could have a favorable or negative effect on the US currency and major indices like the Dow Jones Industrial Average. For instance, a stronger-than-expected NFP report would boost the value of the US dollar relative to other currencies, but weaker-than-expected data might lower the US dollar's value relative to a basket of other currencies like the euro, sterling, or yen. Because of this, trading the non-farm payrolls may be a key component of your trading plan.

When are non-farm payrolls released?

The non-farm payrolls, which provide trading insights into month-over-month and year-over-year data, are typically released at 8.30 am (EST), or 1.30 pm (UK time), on the first Friday of every month. Year-on-year compares the statistic from last month to the same month a year ago, while month-on-month compares it to the previous month.

Depending on whether you believe the non-farm payrolls will come in higher or lower than expected you as a trader can take a position on the US dollar and US indices.

How to trade the non-farm payrolls report

Some traders take a position in the markets around the NFP release as the data has historically been known to cause sudden price movements in the market, giving rise to potential trading opportunities.

Summary

In order to trade the non-farm payrolls more effectively, it's critical for traders to keep an eye on the market and watch analysts' estimates.

The trading platform provides access to an economic calendar, customer mood, and a variety of analyst reports and trading tools, allowing you to create a stronger and more successful trading plan.

Source: CMC Markets UK

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