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US Dollar May Not Find Potent Driver in Payrolls Data

US Dollar May Not Find Potent Driver in Payrolls Data

Ilya Spivak,

Talking Points:

  • US Dollar May Not Find Potent Driver in November’s Employment Data
  • Risk Sentiment Trends May Shape Markets’ Response to US Jobs Report
  • Track Trends and Find Turning Points for FX Majors with DailyFX SSI

A relatively uneventful economic calendar in European trading hours is likely to see traders looking ahead to November’s US Employment report. Expectations call for a 200,000 increase in nonfarm payrolls, marking a bit of a slowdown from the 271,000 gain recorded in the prior month. The jobless rate is seen holding unchanged at 5 percent. Average hourly earnings figures will also command attention considering the Fed’s struggle to bring inflation back toward 2 percent. On this front, forecasts for print at 2.3 percent year-on-year, marking a slight slowdown from the 2.5 percent outcome in October.

In practical terms, this round of jobs data may prove to be a less potent driver of the Fed outlook and the US Dollar than previous outings. Traders have become increasingly convinced that Janet Yellen and company will issue a rate hike at this month’s policy meeting. Indeed, Fed Funds futures now put the probability of a 25 basis point increase at 79 percent, a year-to-date high. FOMC officials have paid a great deal of lip service to the likelihood of this outcome, so it would probably take a truly staggering disappointment to alter their calculus and delay “liftoff”.

On the other hand, pricing in a substantially steeper rate-hike cycle before hearing from the FOMC would likely require an especially dramatic upside surprise. On balance, this means the path of least resistance favors the status quo, and thereby limited follow-through on whatever knee-jerk volatility will emerge immediately after the release.

Policy bets aside, the release may have market-moving potential from a sentiment perspective. Looking at the outcome through this prism, a soft result that keeps Fed rate hike bets intact may spur fears that US growth is an insufficient counterweight to weakness in the Eurozone and China, undermining risk appetite. That may punish higher-yielding FX like the Australian and New Zealand Dollars while boosting the safety-linked Japanese Yen. A strong result might establish a narrative of US resilience even as tightening looms ahead, producing the opposite dynamic.

Losing Money Trading Forex? This Might Be Why.

Asia Session

00:00NZDANZ Commodity Price (NOV)-5.6%-7.1%
00:30AUDRetail Sales (MoM) (OCT)0.5%0.4%0.4%
01:30JPYLabor Cash Earnings (YoY) (OCT)0.7%0.5%0.4%
01:30JPYReal Cash Earnings (YoY) (OCT)0.4%-0.3%
05:00JPYConsumer Confidence Index (NOV)41.741.5

European Session

07:00EURGerman Factory Orders (MoM) (OCT)1.2%-1.7%Medium
07:00EURGerman Factory Orders (YoY) (OCT)-2.5%-1.0%Medium
08:15CHFCPI (MoM) (NOV)0.0%0.1%Medium
08:15CHFCPI (YoY) (NOV)-1.3%-1.4%Medium
08:15CHFCPI - EU Harmonized (MoM) (NOV)-0.0%Low
08:15CHFCPI - EU Harmonized (YoY) (NOV)--1.2%Low
08:30EURMarkit Germany Construction PMI (NOV)-51.8Medium
09:00GBPNew Car Registrations (YoY) (NOV)--1.1%Low
09:10EURMarkit Germany Retail PMI (NOV)-52.4Medium
09:10EURMarkit Eurozone Retail PMI (NOV)-51.3Medium
09:10EURMarkit France Retail PMI (NOV)-51.9Low
09:10EURMarkit Italy Retail PMI (NOV)-48.8Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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