You can see the consensus estimates in the screenshot below.
- The numbers in the rightmost column are the results from the “last time” (last month).
- The numbers in the adjacent column are the expected consensus medians.
- This snapshot from ForexLive’s economic data calendar shows: Access here.
Let’s compare the expected range to the median consensus (“Expected” in the screenshot above) for key data points.
Key NFP figures:
Unemployment rate:
Average hourly wage (vs. previous month):
Average hourly wage change from last year:
Adam shared a preview here:
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Why is it important to know such ranges?
Data results that miss market low and high expectations tend to move the market more dramatically for a few reasons.
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Surprise factor: In markets, expectations are often shaped into prices based on forecasts and past trends. When data deviates significantly from these expectations, the surprise effect occurs. This can lead to a rapid revaluation of assets as investors and traders reassess their positions based on the new information.
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Psychological influence: Investors and traders are influenced by psychological factors. Extreme data points can trigger strong emotional reactions and cause overreactions in the markets. This can amplify market movements, especially in the short term.
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Reassessment of risk: Unexpected data can lead to a reassessment of risk. If data is significantly below or above expectations, it can change the risk perception of a particular investment. For example, better than expected economic data can lower the risk perception of a stock investment, leading to a market upswing.
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Automated trading triggers: In today’s markets, a large portion of trading is done by algorithms. These automated systems often have pre-set conditions or thresholds that, when triggered by unexpected data, can lead to large buys or sells.
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Implications for Monetary and Fiscal Policy: Data that deviates significantly from expectations can influence central bank and government policy. For example, with the NFP being released today, a weak employment report could increase speculation that a Federal Open Market Committee (FOMC) interest rate cut is closer and bigger, whereas a strong NFP would dampen these expectations.
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Liquidity and market depth: In some cases, extreme data points can affect market liquidity. If the data is unexpected, it can lead to a temporary imbalance between buyers and sellers, causing the market to fluctuate wildly until a new equilibrium is found.
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Chain reactions and correlations: Financial markets are interconnected. When unexpected data causes big movements in one market or asset class, it can lead to correlated movements in other markets, magnifying the impact across the markets.
