GFT Markets assess impact of September NFP report

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The release of the September non-farm payrolls (NFP) report had a significant impact on global markets, after revealing US companies added a below-estimate 148,000 new jobs last month.

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Now that the Federal Reserve knows job growth was already decelerating heading into the shutdown, any plans to taper quantitative easing have likely been pushed back into 2014.

Following its publication, the euro strengthened to its highest level versus the dollar since the turn of the year, while the greenback came under pressure against a host of its forex trading peers, including the Japanese yen and the British pound.

NFP reports traditionally have an effect on a wide range of trading instruments, which provides the perfect opportunity for traders to take advantage of the market movements.

The free GFT Markets Guide to Trading the NFP contains strategies that have been formulated and utilised by GFT Markets analysts, including Matt Weller (MWellerFX), Neal Gilbert (FXexaminer) and Fawad Razaqzada (FawadR_GFT).

Although the publication of the report has been delayed by the 16-day shutdown of the government earlier this month, the figures are not affected as they were collected in September.

Commenting on the result, Matt Weller states: "Now that the Federal Reserve knows job growth was already decelerating heading into the shutdown, any plans to taper quantitative easing have likely been pushed back into 2014. I expect the USD to remain under pressure until job growth can consistently approach 200,000."

Fed chairman Ben Bernanke has repeatedly stated in recent months that the bank will look to begin scaling back its asset purchases before the end of the year, but doubts have been cast following the federal blackout and recent disappointing NFP results.

However, today's report does contain some brighter elements, with last month's headline figure upwardly-revised to show a gain of 193,000 jobs, from the originally-reported total of 169,000.

It also revealed that the country's unemployment rate declined to 7.2 percent in September.

Neal Gilbert explains: "Despite the rather weak reading on NFP, the one glimmer of hope came in the unemployment rate dropping to 7.2 percent from 7.3 percent.

"Typically, when we see a drop in the unemployment rate with a mediocre NFP there is an accompanying drop in the participation rate, but that was not the case today as participation remained at 63.2 percent."

Neal notes that whenever the Fed has mentioned employment figures in relation to its stimulus intentions, it has always been in terms of the unemployment rate, rather than specific NFP headline figures.

"Therefore, it may be more prescient to view the Fed's decision through the eyes of unemployment rather than the more popular NFP, which keeps open the possibility of a December taper."

It has been suggested the bank will look to reduce its asset purchases at the December policy meeting as this is the next to be followed by a news conference with Mr. Bernanke.

However, the outgoing Fed chair last month told policymakers he would be willing to schedule one at short notice to explain the bank's decision if it does choose to begin scaling back QE at this time.

UK residents who believe they can predict the Fed's actions at its October 29th-30th policy meeting can take part in the GFT Markets Tapering Poll for a chance to win a £1,000 spread betting account.

Trading forex, CFDs, and spread bets is risky and not suitable for everyone. All of these products (excluding Binary CFDs and Binary Spread Bets) are leveraged, and you can lose more than your initial deposit. Don’t trade more than you can afford to lose.

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