Many investors trade in the foreign exchange (FOREX) market only at or around the time of the US Non-Farm Payroll (NFP) report. They are attracted to the fluctuations in currencies – especially the major pairs that include the US dollar – that occur during that period. Investors who depend on this and other financial news events in their trading activity are referred to as news traders. Many others, while they may use other methods of trading, will almost certainly include the NFP in their trading calendars. Let’s find out why so many traders are interested in this report.
The NFP comes out once a month, usually on the first Friday at 8:30 a.m. New York time. Sometimes it will come out on the second Friday of the month instead of the first, but always at the same hour of the day. The US Department of Labor is responsible for compiling and releasing the report, which remains secret until the time for its official release arrives. The report contains data regarding unemployment in the non-agricultural sectors of the US economy. Incidentally, other industrialized countries publish some semblance of this kind of reporting. Simply put, if the numbers published in the NFP represent a significant revision of estimates previously made, the market response is likely to be quite clear.
The reaction to the expected NFP data from traders around the world, in terms of buying and selling activity, generally leads to an increase or decrease in the price of the US dollar. This usually happens the moment the report becomes public. Sometimes, the rise happens early, i.e. during the minute immediately before the 8:30 AM release. Although less frequent, it has also been noted that spikes can occur up to 15 or 20 minutes after a report is issued.
Other regular financial reports can also move currency prices, but they are not as consistently dramatic or dynamic as the NFP in their outcome. Over the past two years, the range of movement in the price of the US dollar as a result of the non-farm payroll data has typically ranged between 50 and 90 pips in one year direction. Retracement, i.e. the movement of the price back towards the original price, often provides additional trading opportunities. Many traders experience returns of 5 to 20 percent from this report alone.
Why does the NFP stand out for its ability to move the market? The NFP is published by the US government as an official statement of what the US economy is doing. Based on the contents of the report, a measure of a country’s health status is seen in terms of its employment status. Many scholars and traders alike view a country’s employment situation as a leading indicator of how things are doing economically with that country. If the employment situation is bleak, so should its overall economy. A weak economy always portends bad news for the currency of that particular country.
One must realize and appreciate that the US dollar has always generated a lot of interest among the traders all over the world. Known for its liquidity and relative stability and backed by the world’s largest economy (at least until China takes first place as expected in 2026), greenbacks are often accepted as payment for goods and services around the world. This is true even when it is not the official currency of a particular jurisdiction. It is one of the relatively few currencies known as “hard currency”, in the global financial sphere. He is always in the spotlight as a global player.
Recent times have seen the US dollar in a weak trend compared to other currencies. Undoubtedly, world events, including US involvement in Iraq, Pakistan, and Afghanistan, have contributed to the dim view some hold about the value of the dollar. On the other hand, some see it as a good opportunity for American companies, large and small, to export goods and services to other countries. This may lead to a dollar recovery in the long term.
Various strategies have been put in place to take advantage of the tendency of market prices to rise during the time of the NFP news release. As one might expect, some strategies work better than others. More and more vendors and programmers are developing and selling automated software to traders interested in the fast-paced environment surrounding NFP issuance. The price range for such software can range from a few hundred dollars to several thousand dollars. Of course, the NFP can still be successfully traded manually as many traders prove. Regardless of the method or strategy, many in the trading world will continue to pay attention to the NFP and take advantage of its release as one of the greatest regular and frequent opportunities to trade in the forex market.