Why does Nonfarm Payrolls (NFP) Drive the US Dollar & Forex Volatility? One reason is, they are a must if one wants to be a successful investor in the foreign exchange market.
Being profitable in the foreign exchange market and NFPs can be directly correlated. By profitable I mean making a profit from any investment as the price of the asset increases.
The reason Nonfarm Payrolls (NFP) Drive the US Dollar & Forex Volatility is because the supply and demand set in motion and prices in foreign exchange markets. As Supply is only limited by both the speed of cash and processing, supply and demand continue to grow.
As a result the price of each currency increases as the financial market decides upon the best interest rate for each currency, adjusting for inflation. The amount that we pay for each unit of each currency fluctuates due to increased supply as well as decreased demand. The price of each currency also rises and falls in relation to the goods and services in the US domestic economy.
The NFP Statistics of the US Federal Government is a valuable resource in understanding why the price of a currency rises and falls. If the US GDP numbers are inflated the result will be higher nonfarm payrolls. If the American people are out of work the result will be lower nonfarm payrolls.
For the US dollar, Foreign Exchange Markets and Nonfarm Payrolls (NFP) Drive the US Dollar. They are a must to know if one wants to be a successful investor in the foreign exchange market.
To determine how NFP drives the US Dollar and how the US economy is doing, you need to consider the Supply and Demand set in motion by supply and demand. Supply and demand are directly correlated to inflation.
When the supply of a product decreases, the price of that product increases, as the consumer becomes less willing to pay for that product. At the same time the production of that product drops, the price of that product increases, as the manufacturing company begins to eliminate the same labor it once used.
When the supply of a country’s currency is increased, nonfarm payrolls are lowered. When the same thing happens in the US nonfarm payrolls are increased.
When the supply of a currency is decreased, nonfarm payrolls are increased. When the same thing happens in the US nonfarm payrolls are decreased.
Deflation is caused by a lack of purchasing power, while inflation is caused by increased purchasing power. The more purchasing power, the higher prices will be, which in turn causes a decline in inflation.
Deflation is often thought of as good, but when inflation is increasing the effect is usually considered negative. When the deflation in the economy causes an increase in unemployment, the negative effect of inflation is seen as positive, resulting in an increase in inflation.