As you can see from the calendar the consensus for NFP is very bearish i.e. market expecting bad news. So you would think there's lots of upside should the number come in less worse than expected. However, remember that these consensus figures come from analysts and traders are actually pricing in a better number already. So don't expect the markets to rally massively on a better number. However, if the number is worse then expect a big sell-off.

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Walls, treasury yields are going up because the FED is unwinding their corporate bonds and buying back treasuries from govt. It's another way they're reigning in QE. Bad luck China for selling their treasuries at the low... The FED wins again!

Also, for the 'risk-on' trade to continue we need stronger NFP i.e. significantly better than expectations at -68K and probably better than -50K. Anything under that and markets will probably remain nervous.

T-bone, have a look at the below diagram. Wall street (global stocks in general) perform well under a high growth, low interest rate environment i.e. when other fixed income investments are returning below average returns. Gold performs well in a high interest rate (high inflation) environment. However, gold is also a currency i.e. XAU:USD. So a lot of currency traders trade relative strength against EUR:USD hence the correlation between XAU and EUR.



So if non-farm payrolls are generally negative the outlook for the US economy is low growth therefore dampening both equities and gold because interest rates are still very low. However, a lot of people are invested in gold as a safe haven should we have another equity crash because interest rates can't go any lower right now in developed economies.

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[Updated on: Fri, 05 March 2010 22:13]