The ranges of estimates are
important in terms of market reaction because when the actual data deviates from the
expectations, it creates a surprise effect. Another
important input in market’s reaction is the distribution of forecasts.
In fact, although we can have a range of
estimates, most forecasts might be clustered on the upper bound of the
range, so even if the data comes out inside the range of estimates but
on the lower bound of the range, it can still create a surprise effect.
Non-Farm Payrolls
- 50K-160K range of estimates
- 90K-130K range most clustered
- 110K consensus
Unemployment Rate
- 4.4% (5%)
- 4.3% (74%) – consensus
- 4.2% (21%)
Average Hourly Earnings Y/Y
- 3.9% (61%) – consensus
- 3.8% (29%)
- 3.7% (10%)
Average Hourly Earnings M/M
- 0.3% (86%) – consensus
- 0.2% (14%)
Average Weekly Hours
- 34.5 (3%)
- 34.3 (81%) – consensus
- 34.2 (16%)
This NFP report comes at a bad time as not only we have a long US weekend ahead but the US markets close earlier. From a trading perspective, I think we would need notable deviations from the expected numbers to trigger a sustained move. Right now, the market is pricing 67 bps of easing by year-end.
Given the positioning, a hot report should give the best bang for your buck as traders will likely pare back their easing expectatations as we move into the US CPI next week. That will likely result in stronger USD, weaker gold and potentially a pullback in equities and bitcoin.
Conversely, a soft report should strengthen the expectations for a third rate cut by year-end and keep the current trend intact, that is lower USD, higher gold, higher stocks and bitcoin. In case we get a very soft report though, it’s harder to envision the likely reaction for stocks and bitcoin, but the USD should be offered more aggressively while gold will likely surge into new highs.
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