NFP in focus to conclude the week

The Fed has been emphasizing the reliance on data and Powell pointed out that they will have two labor market reports and two consumer inflation reports to go through before the September meeting, so now we are at the first hurdle. The consensus for the non-farm payrolls figure today is +250K.

The main number will obviously attract attention in the markets and any major failure or beat will cause knee jerk reactions. But the details will once again be essential with a look at the unemployment rate and wages.

So what exactly are the markets looking for at this point?

Any sign of labor market weakness is perhaps the main thing to watch out for. We’re at the stage where bad news is good news and if there are any credible signs that the Fed is backing down from being more aggressive, it’s going to be a mess for risky trading.

At some point, rising recession risks will affect confidence – especially if a “hard landing” looms – but for now central banks dominate the narrative and we are already in the second half of the tightening cycle. This is evident by the subtle change from the Fed last week, in which we also saw the RBA and BOE deal with their “policy is not on a predefined path” this week.

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