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NFP - What is it and why do you need to know it?

Non-farm payrolls (NFP) is an important economic report released on the first Friday of each month in the US.

The report measures the change in the number of employees not working in agriculture, government agencies and non-profit organisations. These statistics are important for economic policymakers and investors as they provide information on the health of the labour market and can influence the valuation of currencies, shares and commodities.

For those of us who trade in the market, the NFP report is one of the most eagerly awaited economic reports each month, as it can lead to large movements in the financial markets. It is therefore important for a trader to be aware of the NFP report and its potential impact on the markets.

A positive NFP report, where the number of new jobs created exceeds expectations, can lead to an increase in market prices as it suggests a strong economy and increased demand for goods and services. On the other hand, a negative NFP report, in which the number of new jobs is less than expected, can lower market prices as it suggests a weaker economy and reduced demand.

It is important to note that the NFP report not only affects the stock market but also impacts the foreign exchange and commodity markets. For example, a positive NFP report can lead to a strengthening of the dollar as investors become more positive about the US economy and thus buy more US dollars. The US dollar, in turn, often has a major impact on the movement of other currencies.

In order for traders to benefit from the NFP report, it is important to have a strategy for how to react to any movements in the market. However, it can also be a good strategy not to trade just when the report is released as the risk can be significantly higher given the size of the movements.

Almost regardless of what the NFP figures show, and regardless of whether this creates a trend or other lasting impact, there will be strong short-term movements in the market. This in turn means that it can be tricky to be in the market with open positions when the numbers are released, because even if you are "right", so to speak, it can swing so much in a few minutes that you get a stop loss anyway.

There are other examples of important economic news from the US that can have a similar impact and movement in the markets as the NFP - including the FOMC and CPI.

// Svenska Forexgruppen