Federal Open Market Committee (FOMC) November meeting minutes due Wednesday, 23 November
This preview (in summary) is via Scotia
Recall that the Fed disappointed those who had thought it might deliver a policy pivot at that meeting.
Watch for three things:
- discussion that bolsters Powell’s guidance that the terminal rate estimates are likely to be revised higher in December’s ‘dot plot’ compared to September and the range of opinions around the issue using the Fed’s frequency of citations language (one, a couple, a few, some, several, many, most, all etc).
- Also watch for the frequency of opinions around timing the downshifting in the pace of rate hikes after Powell said “that timing is coming and it may come as soon as the next meeting or the one after it.” Markets are priced for a downshift to 50bps in December and could be vulnerable to any indications that the FOMC is still considering a larger move.
- Finally, expect further rejection of pausing the tightening stance given Powell’s guidance that is “very premature.”
Still, the minutes are at risk of being stale which is often the case when they’re released on a rigid schedule three weeks later. Nonfarm payrolls
Nonfarm Payrolls
Nonfarm Payrolls (NFP) is the single biggest monthly economic news indicator released out of the United States, usually on the first Friday of every month. Reported by the US Bureau of Labor Statistics, the NFP measures the increase or decrease in the number of people employed during the previous month, except for those working in the farming and agriculture industry.The NFP can also be referred to as an Employment Change, and is the most anticipated monthly report. As it’s released at the beginning of each month, it typically causes huge movements in the financial markets, especially in the foreign exchange market. Traders care about the NFP because the creation of jobs itself is one of the most important indicators of consumer spending, a vital barometer that underpins the country’s economy. NFP does not include farming jobs, primarily because these jobs are markedly seasonal, which can cause inconsistent reporting. Essentially, it represents all business employees (excluding general government employees), private household employees, and employees of nonprofit organizations, accounting for about 80% of the workers who contribute to the GDP.Prior to the actual figure being released, industry experts make an educated guess as to what the figure will turn out to be, known as the “expected figure” or “forecasted figure”. Thus, if the actual figure released is greater than what’s expected, then there are more people employed than initially thought, which is great news for the economy.Such an outcome results in traders investing in the US dollar, giving it strength. Likewise, if the actual figure is lower than the forecast, the US dollar typically weakens.However, this is by no means a hard and fast rule, as there are other news reports coming out at the same time, plus revisions can make things extremely haphazard. How to Trade Nonfarm Payrolls Often, traders wait in earnest (or trepidation) for the release, with considerably less trading activity just before the release, often called the calm before the storm, as a price squeeze takes hold.Some traders actually trade these huge spikes (known as news traders), by entering the market immediately after the figure is released, and just before the price makes its move. Depending on how much divergence there is from the expected figure, retail news traders try and take advantage of the fact that there’s guaranteed to be huge movement.
Nonfarm Payrolls (NFP) is the single biggest monthly economic news indicator released out of the United States, usually on the first Friday of every month. Reported by the US Bureau of Labor Statistics, the NFP measures the increase or decrease in the number of people employed during the previous month, except for those working in the farming and agriculture industry.The NFP can also be referred to as an Employment Change, and is the most anticipated monthly report. As it’s released at the beginning of each month, it typically causes huge movements in the financial markets, especially in the foreign exchange market. Traders care about the NFP because the creation of jobs itself is one of the most important indicators of consumer spending, a vital barometer that underpins the country’s economy. NFP does not include farming jobs, primarily because these jobs are markedly seasonal, which can cause inconsistent reporting. Essentially, it represents all business employees (excluding general government employees), private household employees, and employees of nonprofit organizations, accounting for about 80% of the workers who contribute to the GDP.Prior to the actual figure being released, industry experts make an educated guess as to what the figure will turn out to be, known as the “expected figure” or “forecasted figure”. Thus, if the actual figure released is greater than what’s expected, then there are more people employed than initially thought, which is great news for the economy.Such an outcome results in traders investing in the US dollar, giving it strength. Likewise, if the actual figure is lower than the forecast, the US dollar typically weakens.However, this is by no means a hard and fast rule, as there are other news reports coming out at the same time, plus revisions can make things extremely haphazard. How to Trade Nonfarm Payrolls Often, traders wait in earnest (or trepidation) for the release, with considerably less trading activity just before the release, often called the calm before the storm, as a price squeeze takes hold.Some traders actually trade these huge spikes (known as news traders), by entering the market immediately after the figure is released, and just before the price makes its move. Depending on how much divergence there is from the expected figure, retail news traders try and take advantage of the fact that there’s guaranteed to be huge movement.
Read this Term and wage growth arrived after the meeting and were constructive, while October’s core CPI decelerated to 0.3% m/m which FOMC members have since downplayed as something they don’t wish to overreact toward given prior head fakes.
Due at 1900 GMT:
This snapshot from the ForexLive economic data
Economic Data
Economic data typically comes in the form of news releases that are disseminated daily. This information is extremely valuable to retail and institutional forex traders, given the influence such data has on currency rates.Most of the major economic events that are released are reported by sovereign governments throughout the globe. Moreover, there are several economic data points that are released by private organizations that can also move the market.By and large, when new information becomes available the value of a currency pair will change to reflect a potentially new equilibrium created by traders. This information that changes the value of a currency pair can ultimately come in many forms, with economic indicators or data being primary drivers.Why Economic Data Matters in ForexEconomic data is an important barometer that investors can use to measure the performance of an economy. This in turn can influence currency rates.For example, the stronger the economic data, the more likely growth will rise in the country, causing a currency to strengthen. If Gross Domestic Product (GDP) growth in the United States is high, this will help cause the US dollar to rise in value.The reverse is also true. Typically, weaker economic data can forecast a slowing of growth. What traders’ attempt, when trading economic data is to measure how economic indicators are perceived relative to expectations.Before nearly every economic release, the market generally prices in is the median expectation reflected by analysts and economists. These known variables are simply expectations, and the unknown is the actual release. Since currency pairs can move significantly based on new data, traders are always trying to anticipate where the actual figures will come in upon release.Changes to economic data will also filter down to potential changes to interest rates by a central bank. Overall, economic announcements from the United States and Eurozone are heavily watched as they will influence the perceptions of market participants which help drive interest rates and other monetary policy by the Federal Reserve or European Central Bank (ECB) respectively.
Economic data typically comes in the form of news releases that are disseminated daily. This information is extremely valuable to retail and institutional forex traders, given the influence such data has on currency rates.Most of the major economic events that are released are reported by sovereign governments throughout the globe. Moreover, there are several economic data points that are released by private organizations that can also move the market.By and large, when new information becomes available the value of a currency pair will change to reflect a potentially new equilibrium created by traders. This information that changes the value of a currency pair can ultimately come in many forms, with economic indicators or data being primary drivers.Why Economic Data Matters in ForexEconomic data is an important barometer that investors can use to measure the performance of an economy. This in turn can influence currency rates.For example, the stronger the economic data, the more likely growth will rise in the country, causing a currency to strengthen. If Gross Domestic Product (GDP) growth in the United States is high, this will help cause the US dollar to rise in value.The reverse is also true. Typically, weaker economic data can forecast a slowing of growth. What traders’ attempt, when trading economic data is to measure how economic indicators are perceived relative to expectations.Before nearly every economic release, the market generally prices in is the median expectation reflected by analysts and economists. These known variables are simply expectations, and the unknown is the actual release. Since currency pairs can move significantly based on new data, traders are always trying to anticipate where the actual figures will come in upon release.Changes to economic data will also filter down to potential changes to interest rates by a central bank. Overall, economic announcements from the United States and Eurozone are heavily watched as they will influence the perceptions of market participants which help drive interest rates and other monetary policy by the Federal Reserve or European Central Bank (ECB) respectively.
Read this Term calendar, access it here.