Will NFPs provide Forex Direction?

After the European Central Council appropriately left its interest rate unchanged at 1%, the markets reaction has been indecisive resulting in the EURUSD oscillating between 1.5065 and 1.5095 over the last few hours.

Attention should now begin to center on tomorrow’s major risk events when the US Non-farm payroll figures and the Annual Unemployment Rate are released at 8.30am EST.

The general consensus expects the NFPs to fall by 125k, the smallest decline since March 2008, whilst the Annual Unemployment Rate is anticipated to remain at 10.2%.

However, these figures may well disappoint to the negative side as this week’s ADP labor report registered an unexpected increase of 169k compared to the forecasted 150K. In addition, the employment element of the recently released ISM figure posted a decline to 50.8 from the previous month’s 53.1.

Any signs that unemployment could rise may well result in a decrease in consumer confidence as they confront heightening fears over job security and tightening credit.

Such circumstances could produce a surge in safe haven currency flows that would favor the USD and Yen.