GFT Markets analysis in accurate NFP predictions

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Today's non-farm payrolls report has come in below estimate, revealing that 169,000 new jobs were added to the US labour market in July.

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There has been significant confusion in markets, with investors unsure what impact the result will have on the Federal Reserve's intentions regarding its quantitative easing (QE) programme.

Today's non-farm payrolls report has come in below estimate, revealing that 169,000 new jobs were added to the US labour market in July.

As a result, there has been significant confusion in markets, with investors unsure what impact the result will have on the Federal Reserve's intentions regarding its quantitative easing (QE) programme.

Although the consensus estimate was for a figure of 180,000 new jobs, GFT Markets strategists Matt Weller (MWellerFX) and Neal Gilbert (FXexaminer) both accurately predicted the somewhat disappointing result.

In recent months, the pair have been engaged in something of a rivalry, attempting to outdo each other by producing the most accurate forecasts of the NFP headline figure.

This month, using the predictive models they have created and can be found in the free GFT Markets Guide to Trading NFP, both Matt and Neal were within 3,000 of the headline NFP figure.

Fed chairman Ben Bernanke is known to see strength in the US labour market as integral to the wider economy and the bank had been expected to begin tapering earlier this year, only for disappointing NFP results to discourage this.

However, the Fed is known to be keen to act before Mr Bernanke leaves his post in January 2014 and the September policy meeting is one of the four each year that is followed by a news conference with Fed chairman Ben Bernanke.

Fed policymakers are thought to be reluctant to make major changes in months without accompanying conferences, as these give the opportunity for Mr Bernanke to take questions and reassure investors.

Matt commented: "Today's NFP report showed the same slow but steady growth in the US labour market. Though some of the peripherals - including the participation rate and revisions - were weaker than expected, this report likely leaves the Fed on track to start gradually tapering QE later this month.

The figures from previous months saw significant adjustments, with the initially-reported figure of 162,000 new jobs created in July revised down to just 104,000.

"I expect the Fed to reduce its QE programme by between $10-15 billion per month after their meeting in two weeks," Matt added.

Neal also believes today's figure is strong enough to see the Fed begin tapering this month, despite the fact the NFP report has made the situation less clear-cut.

"Despite the hopes that today's NFP release would give investors a clearer direction on the odds of a September taper of QE by the Fed, it only created more fog as the mishmash of both encouraging and discouraging figures likely didn't change any beliefs that were held previous to the release," he explained.

As well as details of the predictive models created and utilised by GFT Markets strategists, the free GFT Markets Guide to Trading NFP contains vital tips and techniques for interpreting the result effectively, whatever your preferred trading instrument.

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