NFP and its impact on the global stock market

The NFP, or Non Farm Payrolls, is a major indicator for stock market speculation. The specificity of this indicator is that its publication is often accompanied by an increase in price volatilities. It mainly influences currency pairs on the US dollar, but also impacts other Forex pairs and even other financial assets.

The definition of NFP

The NFP, or Non Farm Payrolls, is the number of non-farm jobs created in the US during the previous month. The jobs concerned are therefore those in the goods, services and construction industry. Jobs in other sectors such as public administration and especially the agricultural sector are therefore excluded. The NFP is published on the first Friday of each month at 8:30 a.m. New York time. It is often accompanied by great volatility of all financial assets such as currencies, stocks, commodities, but also affects derivatives such as ETFs, CFDs, warrants, etc. To find out more, we advise you to consult the sites publishing the NFP directly.

Why is NFP important to the US economy?

The NFP reflects the health of the US economy. Indeed, a country that creates jobs is a country that produces more and therefore the economy is doing very well. The direct consequence of a healthy economy is then felt in the strength of its currency, the USD in this case. The NFP is also interesting, because this indicator is published every month, unlike other indicators such as GDP for example.

The consequences of NFP on the currency market

It makes more sense for the dollar to rise in value when the NFP is above expectations. On the other hand, when the NFP is below forecasts, the dollar rate is affected. This is how traders position themselves in the medium and long term on NFPs.

However, the stock market most often behaves a bit oddly within an hour of the NFP announcement. Indeed, when the NFP is higher than expectations, the dollar prices drop in the next 15 minutes, before gradually picking up and ending up where they should be. This situation is the result of exaggerated speculation on the part of the main operators.

This is why it would be dangerous for beginners to speculate on the NFP. On the other hand, for professionals who know how to do it, this period of sudden peaks and troughs is an interesting opportunity. It would only be suitable for professionals because rapid and violent positions will have to be taken in order to derive a certain benefit from it.

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