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How Will the Lowest Unemployment Rate Affect USD Currency Markets | Platinum Trading Institute

The unemployment rate is critical as it is a salient metric that helps Federal economists to monitor and modify the US Government’s economic and fiscal policies. Visit our site: www.platinumtradinginstitute.com/

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How Will the Lowest Unemployment Rate Affect USD Currency Markets | Platinum Trading Institute

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  1. FOREX TRADING How Will the Lowest Unemployment Rate Affect USD Currency Markets?

  2. What is Unemployment Rate? • Unemployment rate is the lagging indicator that determines the strength of the US economy, and in turn, the strength of US dollar. • In its simplest form, it is the total number of unemployed in the Non-Farm segments divided by the total labor force. • The number is expressed in percentage format and is declared by the Bureau of the Labor Statistics on the first Friday of every month. • As expected, it rises during cyclical downturns and falls during periods of rapid economic growth. It is a lagging indicator as the rate peaks after the trough of the business cycle, and bottoms after the peak is formed.

  3. Why is it Important? The unemployment number is critical as it is a salient metric that helps Federal economists to monitor and modify the US Government’s economic and fiscal policies. If the rate is too high, the Feds will try to stimulate the economy by either: (1). Implementing job creation programs, or (2). Lowering Federal fund rates, or (3). Instituting fiscal policy measures, such as, tax cuts, and extended unemployment benefits. In any event, high unemployment rate is an indication of weakened US economy and US dollar alike.

  4. Unemployment Rate’s Impact on US Dollar Lower than expected unemployment rate leads to more income earning workers and an increase in consumption expenditure that may fuel inflationary pressures, andcaue interest rates to rise. High levels of unemployment results in lower incomes, decreased consumption and a drop in economic activity. Thus, a drop in the unemployment rate is generally considered to be positive (or bullish) for the USD, while a rising figure is seen as negative (or bearish) for the currency.

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