Many first time spread betters are drawn to the currency markets. Indeed, alongside commodities and equity indices (such as the FTSE 100), City Index says forex is in its top three. The key to being successful is betting ahead of major pieces of economic news and correctly second-guessing how an exchange rate will react. But which pieces of news should you follow? If you only ever pick one, make it the US non-farm payroll number. Here’s why.
Despite all the clamour about emerging markets, and China in particular, the biggest economy in the world is still the US. So currency pairs that feature the US dollar are very big business in spread betting terms. And the one number that can be relied on to move the dollar – sometimes a lot – is non-farm payrolls.
It is released on the first Friday of the month (so 3 June this month) and, despite excluding certain types of worker such as farmer employees, it is thought to capture around 80% of the workers who produce US wealth (measured as gross domestic product, or GDP). If the number comes out below expectations, the dollar can drop sharply and immediately, and vice versa for strong figures. Sure enough just last week the dollar plunged after a disappointing number of jobs (54,000) were added in the US economy in May according to Friday’s report. In short, fewer added jobs suggest weak growth prospects for the wider economy as employers rein in recruitment. Few pieces of economic data are so reliably able to shift the dollar up or down.
Indeed, so important is the non-farm payrolls figure that there are some spread betters who trade little else and will open and close bets across currencies, indices and commodities such as oil (priced in US dollars) in response to each monthly Friday release. So, ignore it at your peril. As a beginner in the currency markets, it’s the first number I would want a handle on.