The Impact of the U.S. Employment Report on Exchange Rates

31 Pages Posted: 28 Aug 2019

See all articles by Louis H. Ederington

Louis H. Ederington

University of Oklahoma - Division of Finance

Wei Guan

University of South Florida St. Petersburg

Lisa Yang

Montana State University - Bozeman

Date Written: September 23, 2018

Abstract

The impact of the U.S. Employment Report and analyst forecasts of that report’s major statistics on Pound/Dollar, Yen/Dollar, and Euro/Dollar exchange rates are explored. While the nonfarm payroll employment figure has the greatest impact, we find that the exchange rates also react to the announced revision to last month’s payroll figure and to the unemployment rate. In all three markets, the exchange rate response to the payroll employment figure is strongly conditioned on pre-release analyst uncertainty. The median analyst forecast from Bloomberg anticipates over 80% of the monthly variation in the payroll figure and is basically unbiased. The markets appear to respond to these analyst forecasts prior to the government release. Analyst forecast dispersion tends to increase following large forecast errors indicating that when the announced figure is far from what analysts expected, they tend to disagree on the implications for future payroll levels.

Keywords: employment report, exchange rates, macro announcements, foreign exchange market

JEL Classification: F31, G14, G15, G17

Suggested Citation

Ederington, Louis H. and Guan, Wei and Yang, Lisa, The Impact of the U.S. Employment Report on Exchange Rates (September 23, 2018). Journal of International Money and Finance, Vol. 90, 2019, Available at SSRN: https://ssrn.com/abstract=3442501

Louis H. Ederington (Contact Author)

University of Oklahoma - Division of Finance ( email )

Norman, OK 73019
United States
405-325-5591 (Phone)
405-325-7688 (Fax)

Wei Guan

University of South Florida St. Petersburg ( email )

College of Business
140 Seventh Avenue South
St. Petersburg, FL 33701-5016
United States
(727) 873-4945 (Phone)
(727) 873-4192 (Fax)

Lisa Yang

Montana State University - Bozeman ( email )

Bozeman, MT 59717-2920
United States

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