How US Non Farm Payrolls Work In Automatic Forex Trading Most people who get involved with automatic forex trading aren't able to understand the importance of the US Non-Farm Payroll report to financial markets on a global basis . Many people ask me , " why does the US jobs number each month led to ups and downs in the market?" To give you an answer we must realize at what the US jobs number actually represents. This will show us why it can make markets move in a way nothing else can . Each month, on the first Friday, the US Non-Farm payroll report is released . It is released by the US Bureau of Labor and Statistics or (BLS) and what it does is measure, quantitatively , is the number of new jobs, outside of farming , created by the US economy in the month prior . This announcement is so important because the health of the US and global economy are both reflected . In reality , this economy is the world's largest and within the US the main component happens to be consumer spending; actually making up 70%! Thus , in automatic forex trading, because the weakness or strength of a currency in a country is mainly affected by the interest rates in the country , you need to take a look at what actually drives those rates ; or the US Federal Reserve's interest rate policy . Probably the most important data for the Fed to use is this job report in order to set their short term interest rates and because of this the Non-Farm Payrolls report can, and often does , can lead to market volatility. Wondering why the Federal Reserves decision on short term interest rates are related to the jobs report ? A wonderful question! If the jobs report is on the strong side this means that many people have jobs and there is high resource utilization. This means workers are being hired by companies and these workers are going out and spending money too on clothing, eating out, and more and the economy is driven by these things ; they make the economy grow or heat up . When the economy is heating up more money is in circulation and keeping inflation in check is very important for the Federal Reserve. They can keep inflation in check and lower inflation by raising the short term interest rates, which cools the economy down , or they heat up the economy by lowering the short term rates to help raise inflation . As you can see , so the job number is a huge factor , driving all of this beneath the surface . The next time you are trying to prepare for a automatic forex trading day or the next week , take a look at the fundamental information on the events calendar that will be released in the next day or week . If you are still in the month's first week then on the Friday of that first week you'll have the Non-Farm Payroll report coming out since this is always the day of release. If you're planning to take advantage of market volatility that occurs when this jobs report is released, keep in mind this formula: A stronger economy usually is going on if the numbers of jobs are stronger than expected which will lead to a strengthening of the currency because short term interest rates go higher. On the other
hand , if the jobs report comes out weaker than expected then in most cases the short term interest rates will go lower leading to the weakness of the currency. Of course it's not always this cut and dry or black and white , but knowledge of these general parameters will give you a leg up on your fellow trading competitors David F Dacosta - Is a private trader using technical analysis to do automatic forex trading & futures trading. David makes specific trade recommendations for a small select group of traders. He uses drummond geometry to make his forecasts. Click Here for training materials and a free forex trading forecast.