Forex Trading: How Jobs Data Impacts Currency Markets

Forex Trading means, first of all, getting informed. Gathering information before placing orders, and specifically before even planning them, is an activity of fundamental importance. Analyzing the market and the economic context is the only way to experience trading in a non-passive manner, and to erect a barrier against the uncertainty that price trends usually force traders to face. From an analysis point of view, a primary role, although often overlooked, is played by labor data, or the market movers that, from various angles, record the performance of the labor market. In the following article, we will delve into the topic, offering some useful advice for traders who have yet to develop the necessary awareness of labor market movers.

Why study labor market movers

In the collective imagination, finance and the world of investments appear completely detached from the real economy. In fact, the absence of a connection in this sense is a source of criticism for the financial world. However, the link exists and is also very solid. Those who have been trading for some time, and are faced with market analysis every day, know this well. Specifically, they are aware of how the real economy affects prices. After all, in a globalized world like today's, everything is connected and everything is placed in a relationship of interdependence. This is true from a geographical and technical point of view. So yes, even labor data influences Forex Trading. And it couldn't be otherwise: if it is true that the real economy influences prices, this is equally true for labor data, which influences the real economy. Therefore, if you intend to have a career in Forex Trading, or at least get the best out of the market, do not neglect the market movers that refer to the labor market. Of course, it's not very easy to integrate them into the analyses. Also because each country follows its own approach, so a type of data can be issued by one country and ignored in another. From this point of view, if we exclude a couple of exceptions, there is no homogeneity between market movers. For this reason, it is good to have a clear understanding of how the context is composed, and to develop a certain awareness of the specificities of each economy and each country.

The main labor market movers

As already mentioned, each country has its own labor market movers. That is, it publishes a certain type of data compared to the other. Hence the need to gather information about the approach taken by the country linked to the reference currencies, that is, those that represent the center of one's trading activity. There are, however, some points of contact, namely market movers that are published by all countries, in a more or less indistinct manner. The reference, obviously, is to the unemployment rate and the employment rate. The unemployment rate is the ratio between the number of unemployed people and the number of people between 16 and 65 years old, excluding those who are not seeking employment (the so-called inactive). Therefore, when you read that in Italy the unemployment rate is 11%, it does not mean that 11% of the population is unemployed, but that 11% of working-age people included in the labor market (even as individuals seeking employment) are unemployed. A different discourse, and ultimately less complicated, for the employment rate. It is, in fact, calculated on all people of working age, thus not counting the inactive. For this reason, in the vast majority of cases, the sum of the two rates never reaches one hundred. Apart from these two market movers, which as we have said are issued by all countries, it is good to also refer to those that are "specific" or at least typical of some countries rather than others, although not necessarily exclusively. Non-Farm Payrolls of the United States. The data records the change in the number of employed persons, excluding workers engaged in the primary sector and non-profits. It is published on a monthly basis. In general, it has a very strong impact, primarily on the dollar but also on the forex market as a whole. JOLTS of the United States. It is the acronym for Job Openings and Turnover Survey. It is the result of a census-type survey conducted on the US market and aimed at reporting the exact number of job offers issued in the public and private sectors. It is therefore an important indicator for employment. Average Earnings Including Bonuses of the United Kingdom. The data expresses in percentage terms the change in average earnings, surveyed at all levels, in all sectors, and in both labor markets (public and private). It is an important figure also because in addition to suggesting the conditions of work in the United Kingdom, it offers indications about purchasing power, especially if compared to inflation.

How to interpret labor market movers

The first step is to understand which market movers need to be followed and analyzed. The advice, obviously, is to concentrate on the market movers of the countries connected to the currencies that you intend to trade. However, US data should also be taken into consideration, given the importance that the US economy has for the global context. The reference, in this case, is not so much to the unemployment rate, but to the Non-Farm Payrolls. It is good, however, to take some precautions. First, the analysis of labor market movers must be well integrated into the general analysis. As important as they are, in fact, "labor" data cannot alone offer an overview of how the price will behave in the near future. From this point of view, they are "simply" additional factors to take into consideration. Second, always and in any case contextualize the data. In fact, the impact is not given by the value itself, but by the performance compared to normal conditions and the previous survey. Obviously, an unemployment rate of 10% is very high, but it's one thing if this rate is expressed by Italy (used to 11%) and another thing if this rate is expressed by Germany (used to 5.4%). Therefore, inform yourself and collect historical data relating to each market mover you intend to analyze. Finally, if necessary, foster the idea of temporarily renouncing trading activity. In some cases, the context is truly uncertain and analysts are not even able to produce a shared forecast. In these cases, operations are more risky than usual, precisely because a predictive reference point on which to base one's analyses is lacking. Therefore, if you don't see it clearly, skip a turn. Very often waiting is the best decision you can make.