Strong NFP may not translate to stronger Dollar

Today NFP report is to be published at 13:30 GMT from US.

What is NFP report?

• NFP or non-farm payroll report is the monthly statistics on labor condition in the US released by US department of labor statistics. The report comprises goods, construction and manufacturing sector companies.
• This report influences the financial markets deeply across asset class.

Key highlights -

• Headline number for total hires last month was 211,000. December ADP employment number was better than expected and robust enough at 257,000, higher than 211,000 in November.
   
• Change in private payroll has been 197,000 last month. Today expected 200,000.
   
• Total payrolls are expected at 200,000.
   
• Second most vital component is wage growth, which is lagging, in spite of solid job gains for the past two years. However in October wage growth was 0.4% m/m, up 2.5% from a year ago. This pace has been highest since late 2009. Wages this month, are expected to grow at 0.2% m/m but 2.8% on yearly basis.
   
• Labor force participation rate is showing no signs of rebound. It was at 62.5%, in last report. It has actually weakened over the past year.
   
• Unemployment rate is expected to remain at 5%.
   
• Underemployment rate is expected to fall further from current 9.9%

Impact 

• Volatility is sure to be on the card, post release.
   
• Any number above 250,000 would be considered as very good and expectations for FED rate hike should move up not only over current hike but subsequent hike.
   
• Any number above 160,000 should be enough to sustain rate hike expectations.
   
• While number below 150,000 might dent dollar's strength, better than expected number may not be a big supporter of Dollar as key remain inflation.

Better than expected wage growth would be additional boost for Dollar as it might lead to inflation.

FXCM US Dollar index is currently trading at 12200, up 0.25% today.