Many investors in the foreign-exchange (FOREX) market trade only at or around the time of the release of the U.S. Non-farm Payroll Report (NFP). They are attracted by the volatility of currencies – particularly the major pairs involving the U.S. dollar – that occur during that time. Investors relying on this and other financial news events for their trading activity are referred to as news traders. Many others, while perhaps utilizing other methods of trading are sure to include the NFP on their trading calendars. Let’s find out why so many traders are interested in this report.
The NFP comes out once per month, typically on the first Friday at 8:30 a.m., New York time. On occasion, it will come out on the second Friday of the month rather than the first, but always at the same hour of the day. The U.S. Department of Labor is responsible for the compilation and release of the report, which is kept secret until the official time for release arrives. The report contains data regarding unemployment in non-agricultural sectors of the U.S. economy. Incidentally, other industrialized countries also publish some semblance of this type of report. Simply put, if the numbers published in the NFP represent a major revision of the estimates previously made, the market response is likely to be quite pronounced.
The reaction to the anticipated NFP data on the part of traders world-wide, in terms of buying and selling activity, generally causes the price of the U.S. dollar to spike up or down. This usually happens the very moment the report becomes public. Sometimes, the spike occurs early, i.e. within the minute immediately preceding the 8:30 a.m. release. Although less frequently, it has also been observed that the spike can occur up to 15 or 20 minutes after the release of the report.
Other regular financial reports can also move currency prices, but are not as consistently dramatic or dynamic as the NFP in their result. Within the past couple of years, the range of movement in the price of the U.S. dollar as a result of the NFP has usually been between 50 and 90 pips in one general direction. Re-tracement, i.e. movement of the price back toward the original price, often provides additional trading opportunities. Many traders experience returns ranging from 5 to 20 percent from this one report alone.
Why does the NFP stand out in its ability to move the market? The NFP is published by the government of the United States as an official statement of what the U.S. economy is doing. Based on the contents of the report, the measurement of the health of the country is viewed in terms of its employment situation. Many scholars and traders alike view the employment situation in a country as a leading indicator of how things are economically with that country. If the employment situation is bleak, so must be its general economy. A weak economy invariably spells bad news for the currency of that particular country.
One must acknowledge and appreciate that the U.S. dollar has always generated a lot of interest among traders world-wide. Known for its liquidity, relative stability, and being backed by the world’s largest economy (at least until China takes the number one spot as expected in 2026), the greenback is often accepted as payment for goods and services all around the world. This is true even where it is not the official currency in a given jurisdiction. It is one of the relative few currencies known as “hard currency”, in the global financial realm. It is always in the spotlight as a global player.
Recent times have seen the U.S. dollar in a weakening trend in comparison to other currencies. Undoubtedly, global events including the U.S. involvement in Iraq, Pakistan and Afghanistan have contributed to the dim view shared by some regarding the value of the dollar. On the other hand, some see it as a good opportunity for U.S. corporations, large and small, to export goods and services to other countries. This may result in a rebound of the dollar in the long term.
Various strategies have been devised to take advantage of the tendency of the market prices to spike 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 the release of the NFP. The price range of such software can be anywhere from a few hundred dollars to several thousand dollars. Of course, manually trading the NFP can still be done successfully as many traders are proving. Regardless of the method or strategy, many in the trading world will continue to pay attention to the NFP and utilize its release as one of the greatest regular and recurring opportunities for trading in the FOREX market.
