NFP Report In Focus, BoC Decides On Interest Rates

December 06, 2023 11:28

The US Nonfarm Payrolls (NFP) report due on Friday stands out from important financial data releases for the rest of this week. The latest US Job Openings and Labor Turnover Survey (JOLTS) published on Tuesday revealed that the ratio of job openings to the number of unemployed workers fell to 1.34, its lowest reading in the last two and a half years.

Labour market conditions play a role in the Federal Reserve’s monetary policy decisions. While some analysts suggest that the Fed’s board plans significant rate cuts in 2024, Blackrock economists suggested that these bets could be overdone. Speaking to reporters, Blackrock’s chief investment analyst, Wei Li, noted that “something will have to go seriously wrong for that to come through. So, we do think that the Fed will cut rates, probably in the second half of next year, but how many cuts they will deliver will be quite a bit less compared with the old economic cycles, old recessions.”

In Australia, the GDP growth rate for the third quarter of 2023 came in at 2.1%, matching the second quarter reading and surpassing analysts’ expectations. The report by the Australian Bureau of Statistics (ABS) attributed the stronger than anticipated growth rate to “government spending and capital investment.”

Bank of Canada Interest Rate Decision

The Bank of Canada will announce its interest rate decision later in the day. Economists suggest that the BoC will keep its borrowing costs on hold as various data have shown that inflation is dropping, and the labour market has started to feel the heat from the monetary policy tightening action taken in the first half of the year.

Market analysts now believe that the BOC’s board will cut interest rates sometime in the second quarter of 2024. Commenting on the upcoming rate decision, CIBC economists wrote that “if the Governor wants to stick to his view that a recession won’t be necessary to get to a two per cent CPI, he can’t add interest rate pressure to an economy that has already shown zero average growth in the prior two quarters. It’s almost easy to forget that the central bank has a rate decision to announce, because there’s absolutely no reason to expect that interest rates will budge at this point.”

US Nonfarm Payrolls In November

On Friday afternoon, the Bureau of Labour Statistics (BLS) is going to publish the November Nonfarm Payrolls survey. The NFP report is always scrutinised by market analysts as it reflects the state and conditions of the labour market in the country. Markets expect the NFP figure to come in at 185,000, higher than the 150,000-figure recorded in October.

A higher than anticipated figure could strengthen the US dollar as analysts would suggest that the Federal Reserve could reevaluate its interest rate plans although most economists believe that the board considers a rate cut in the first quarter of 2024. On the contrary, a lower-than-expected NFP number would show that the labour market has been impacted by the monetary tightening policy actions.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Miltos Skemperis
Miltos Skemperis Financial Content Writer

Miltos Skemperis’ background is in journalism and business management. He has worked as a reporter on various TV news channels and newspapers. Miltos has been working as a financial content writer for the last seven years.