One of the key data points drawing significant attention this week is the U.S. Nonfarm Payrolls (NFP) report, set to be released on November 1. This data will influence the direction of the USD, measured by the U.S. Dollar Strength Index (DXY), thereby impacting commodity prices.

Source: ForexFactory

NFP stands for Nonfarm Payrolls, which compiles data reflecting the U.S. employment situation, excluding workers in farming, federal government, private households, and nonprofit organizations. Job creation is a key indicator of consumer spending, which accounts for a large portion of the country's economic activity. Therefore, this is a critical data point for the USD.

The report typically includes unemployment rates, changes in nonfarm payroll employment, and average hourly earnings. Theoretically, if the NFP data exceeds expectations, it benefits the USD; if it falls short, it poses a disadvantage for the USD.

Last month, the Fed made its first rate cut since 2020, reducing the federal funds rate to 4.75%-5%. The Fed had raised rates by 525 basis points in 2022 and 2023 to curb inflation. However, significant declines in inflation and an increase in the unemployment rate from 3.4% in April 2023 to 4.3% in July this year prompted the Fed to cut rates by 50 basis points, a more aggressive move than the market had anticipated.

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