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NFP to be released today, with major currency pairs (EURUSD, USDJPY, GBPUSD, AUDUSD, USDCHF) to be closely monitored for potentially greater volatility and wider spreads

BLOG December 4, 2020 at 02:46 am (GMT)

• Pfizer’s planned reduction on vaccine distribution reflected on US stocks
• Congress moved a step closer on the stimulus package, sinking the USD
• US non-farm payroll: what is it and how will it affect the FX market

Pfizer announced that it will cut the vaccine distribution by half in 2020 to 50million doses due to supply chain constraints. Previously, the company confirmed that their 2021 planned distribution was 1 billion. S&P 500 index ended with marginal losses right after the release of this announcement. However, Moderna has good news – a recent study from this company shows that its vaccines has potential for durable immunity.
On the stimulus package, two parties are gradually moving closer on a potential agreement. Market is expected to see a striking deal by the end of the year. As a result of this optimism, USD sank unsurprisingly. DXY index fell to a two-and-half-year low of 90.60.
This Friday a key economic figure is on the agenda to be released – the U.S. non-farm payroll (NFP), which represents the number of jobs added for the past month, excluding the farming sector employees. It is released on the first Friday of each month, and due to this frequency, it is a key indicator on the current economic condition. NFP is also crucial to the FX market because employment is extremely important to the Federal Reserve Bank. When the unemployment is high, policy makers will incline towards an expansionary monetary policy, lowering the interest rates and bringing up the inflation expectations. The strong stimulatory preference will reduce the demand for USD, since investors will turn to other higher yielding currencies for greater return.
Currency pairs that are most likely in the NFP radar are: EURUSD, USDJPY, GBPUSD, AUDUSD, and USDCHF. However, since the NFP data release is usually accompanied with increased volatility and widening spreads, other major currencies pairs that are not directly linked to USD could also witness a similar movement. For the upcoming release, the forecast is at 475k increase in jobs added, a fifth consecutive monthly slowdown.