Silver Price Forecast: XAG/USD recovers half of early losses, still down ahead of US NFP data

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Silver price (XAG/USD) claws back half of its early losses in the European trading session on Friday, but is still 1.7% down to near $72.60. The white metal is expected to remain volatile, as the United States (US) Nonfarm Payrolls (NFP) data for May is scheduled to be published at 12:30 GMT.

Silver price is still trading 1.7% lower to near $72.60 in the countdown to the US NFP data.
Latest Fed remarks have shown that officials are more concerned about high inflation than weak job demand.
Fed’s Schmid states that the choice for the central bank is between holding interest rates or raising them.

Investors will pay close attention to the US NFP data to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook.

The US NFP report is expected to show that the economy created 85K fresh jobs, lower than 115K in April. The Unemployment Rate is seen steady at 4.3%. Average Hourly Earnings, a key measure of wage growth, is seen arriving lower at 3.4% Year-on-Year (YoY) from the previous reading of 3.6%. On a monthly basis, the wage growth measure is expected to have grown at a faster pace of 0.3% against 0.2% in April.

Signs of improving US job demand would prompt hawkish Fed prospects; however, soft figures would have a limited impact on the Fed’s monetary policy expectations, as recent remarks from officials have indicated that they are more concerned about high inflation than weak employment conditions.

On Thursday, the comments from Kansas City Fed Bank President Jeffrey Schmid indicated that the central bank has to make a choice between holding interest rates at their current levels or raising them to tame inflationary pressures.

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Why it matters to traders?

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.