NFP (Non-Farm Payrolls)

What is NFP (Non-Farm Payrolls)?

The term NFP stands for Non-Farm Payrolls, and it is a monthly report that shows how many new jobs were created in the United States during the previous month. However, it does not include farm workers, government employees, private household workers.

This is why it is called the non-farm payroll or non-farm payrolls report. In simple terms, it tells us how many jobs were added (or lost) in the US economy, excluding a few categories. Because jobs are directly linked to economic growth, this report provides a clear picture of the overall health of the US job market.

Why NFP Matters (with Examples)?

The non-farm payrolls report has a major impact on the US Dollar because it shows how strong or weak the US job market is. When the US Dollar changes in value, it also affects the price of currency pairs that include the US Dollar, such as EURUSD (Euro against US Dollar).

• If the number of jobs is higher than expected, it usually signals a strong economy. The US Dollar often gains value, which can cause EURUSD to fall to a lower level.
• If the number of jobs is lower than expected, it may point to economic weakness. In this case, the US Dollar may lose value, and EURUSD could rise instead.

Because of this, the NFP release is one of the most closely watched events by traders around the world.

NFPs Impact on Trading

The non-farm payroll report is released on the first Friday of every month. Since it is such a major event, it often leads to sudden and fast price changes in the market. Traders use this opportunity to open trades based on their expectations of the data, but the movements can be highly unpredictable and risky.