Today sees the release of perhaps the most important piece of economic data in the world – US non-farm payrolls. This is a number with the power to seriously move markets. Why, and how can you take advantage?
First off, remember that the US boasts the largest economy in the world measured by GDP. So what moves America shakes the rest of us too. The non-farms payroll data is a snapshot on the state of a big chunk of the US jobs market. The number is released early afternoon (12.30 GMT) on the first Friday of each month.
An increase above analysts’ expectations suggests businesses are growing; people therefore have money to spend, and economic growth is on the up. Right now it would also make more monetary easing in the form of quantitative easing (QE) (for anyone new to this, here’s a link to my explanatory video) less likely. Equally, if the data disappoints, attention will turn back to the Fed and the possibility of QE3 to bolster a weakening economy.
So what to do as a spread better? If the data is positive three trades will make money – long a major stock index such as the S&P 500, short the euro/dollar rate (since a good number will see the dollar strengthen against other currencies) and short sterling/dollar, for much the same reason.
A bear on the US data would place the exact opposite trades.
Don’t forget to use stop losses incase we get a big surprise. And anyone who is brand new to spread betting, or of a nervous disposition should consider getting out of the market altogether. These are volatile times and NFP data may make markets even more so.