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Friday's new data on the US labor market will help determine where the EURUSD rate will go

03 November 2022 130
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After yesterday's release of the Fed, there was some spread associated with the uncertainty of the further direction of the actions of the American regulator.

 

On the one hand, Jerome Powell, the Federal Reserve chairman, said that interest rates in the United States will rise higher than previously predicted.

 

But, on the other hand, he added that this could soon lead to smaller rate hikes.

 

Speaking to reporters on Wednesday after the Fed raised rates by 75 basis points for the fourth time in a row, Powell said that "incoming data after our last meeting suggest that the final level of interest rates will be higher than previously expected."

 

Powell said it would be appropriate to slow down the pace of increase "as soon as at the next or the one after that. No decision has been made.” At the same time, he stressed that "there are still some ways" before the rates become quite tough.

 

Financial markets reacted sharply to Powell's announcement, which combined a hawkish bias towards higher rates with a dovish nod towards a possible short-term decrease.

 

No new estimates were published at this meeting, and they will not be updated until officials meet on December 13-14, when they will have two more months of employment and consumer inflation data.

 

So, what, at the moment, can add clarity for ordinary traders?

 

In my opinion, the upcoming publication of labor market data this Friday (November 4) will play an important role in determining the Fed's future policy.

 

If these data are better than the forecast (low unemployment and high non-farm payrolls), this will signal a "hot" economy, and accordingly create conditions for further tightening.

 

If labor market data show a "cooling" (the unemployment rate is higher than the forecast and the figure of non-farm payrolls is below the forecast), this will signal the development of negative trends in the real sector and a slowdown in the economy. And this will already incline the Fed to a softer policy and the imminent curtailment of quantitative tightening.

 

Summary:

 

We buy EURUSD if on Friday: the unemployment rate is higher than the forecast (3.6%); the figure of non-farm payrolls is below the forecast (200K).

 

We sell EURUSD if the data are the opposite: the unemployment rate is below the forecast (3.6%); the figure of non-farm payrolls is above the forecast (200K).

 

If the data are mixed, it is better to refrain from transactions.

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