NFP Preview – Key Levels to Watch for USD & Equities
Article published on March 7th, 2025 2:00AM UK Time
Soft Data Signals Weakness, But Hard Data Holds the Key
As we approach the March 7th Non-Farm Payrolls (NFP) report, market sentiment is cautious following a run of weak US economic data. However, much of the deterioration has been in soft data points, rather than the more definitive labor market indicators.
- S&P Global Services PMI entered contractionary territory, reflecting tariff concerns weighing on business sentiment.
- University of Michigan Sentiment came in at 64.7, with inflation expectations rising to record highs (4.3% for 1-year, 3.5% for 5-year outlook).
- US Consumer Confidence disappointed, falling below the lowest market expectations.
Notably, the UoM inflation expectations split along party lines, with Republicans perceiving little inflation, while Democrats saw high inflation—a political skew that adds nuance to the data’s interpretation.
Now, attention turns to Friday’s NFP print, which could either confirm weakness in the labor market or push back against the recent soft data narrative.
Key Market Reactions to NFP Scenarios
Traders should watch for three key components in the report:
1️⃣ Headline Jobs Growth
2️⃣ Unemployment Rate
3️⃣ Average Hourly Earnings
Depending on how these figures land, USD, equities, and rate expectations could shift dramatically.
📉 Weak NFP Print (Recession Fears Grow)
💥 Trigger levels:
- Headline jobs below 30k
- Unemployment rate at 4.2% or higher
- Wage growth at 3.9% or lower
🔺 Market Impact:
- USD weakness as markets price in earlier and deeper rate cuts
- EUR/USD upside as Fed rate cut expectations surge
- Treasury yields decline, reinforcing risk-off flows
📈 Strong NFP Print (Higher for Longer Fed)
💥 Trigger levels:
- Headline jobs above 300k
- Unemployment rate at 3.8% or lower
- Wage growth at 4.3% or higher
🔻 Market Impact:
- USD strengthens, as markets scale back rate cut bets
- S&P 500 sells off, as higher-for-longer Fed policy pressures equities
- Treasury yields rise, reinforcing hawkish rate outlook
- EUR/USD downside, as rate divergence favors the USD
- FX and equities as markets recalibrate rate expectations.
Stay focused on the data—Friday’s NFP will set the tone for USD and equity markets heading into the Fed’s next decision.
