Do Employment Figures Fuel Fx Trade?

Do employment figures fuel FX trade?

Do employment figures fuel FX trade?

With it being the most popular financial market in the world, traders are always on the lookout for any information that might have an impact on the forex (FX) market. Trillions of dollars change hands daily in the market, but what actually are the factors that determine an FX trade?

Every FX trade is conducted with currency pairs and so it is important to know as much about both currencies as possible. One currency pair that may be of interest to Singapore traders is the AUD/USD pair; the Australian and US dollar. Despite the economic downturn, the US economy is the largest in the world and the USD is present in almost 85% of all FX trades.

There are a number of mitigating factors that could affect a currency. An economic indicator that is generally regarded as significant for most currencies is the unemployment rate of the currencys nation. In April 2012, contrasting employment figures for Australia and the US resulted in some sharp movement in the currency pair.

On April 06, the US nonfarm payrolls, released by the US Department of Labor and often seen as a key figure for US employment levels, bucked a four month trend of growth in the sector by only registering 120,000 new employees for March. This was down from 240,000 the previous month and nearly 40% lower than official estimates. This resulted in the USD weakening over the Easter period.

Conversely, the Australian employment change figures, released by the Australian Bureau of Statistics on April 12, registered its second highest number for 15 months, with a 44,000 increase in the number of people in employment. This came in the wake of disappointing figures for the previous month and also far and away exceeded the estimate consensus of a 6,000 positive gain. This news galvanised the AUD, dramatically strengthening it against the USD in a matter of minutes.

It has to be remembered that, in between the release of the unemployment figures for both countries, the AUD/USD pair did fluctuate. This is evidence that a whole number of other economic factors can affect a currencys strength and that traders should never just rely on one event to predict an FX trade. Furthermore, the movement witnessed in the AUD/USD currency pair, as a result of the news, will not always occur in the same way to similar news.

IG Markets aims to help you make sense of every potential FX trade with a collection of information. They offer a specific forex focus, designed to help you keep track of your chosen currency pairs, as well as market analysis throughout the day. When you feel ready to apply your knowledge, IG Markets provide both its award-winning PureDeal platform for PC and applications for mobiles and tablets, for people on the go.

This article is provided for information purposes and should not be regarded as financial product advice. Please refer to the risk disclosure statement from IG Markets. CFD trading can result in losses that exceed your initial deposit. You should consider the information in light of your specific objectives, financial situation or needs before making any trading or investment decision.

by: Thomas Roberts

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