Further US labor market tightening likely

Next week, as every first week of the month, market attention will be focused on the non-farm payroll report. 

"An increase of 200k is expected in the headline number (190k for the private payroll), a steady unemployment rate of 5.1%, and a 2.4% y/y increase in wages. These figures are seen as robust indicators of tighter labor market conditions and supportive of inflation in the months to come", says Barclays. 

On that regard, PCE numbers will be published. A 1.2% y/y increase is likely in the core figure and a flat reading for the headline number. Manufacturing ISM is expected to decline mildly from to 51.1 to 50.5.
 "In terms of price action, we uphold our view of further USD outperformance versus the emerging market currencies as risk premia remains elevated on China growth, outflows, and policy opacity concerns. Compared with developed countries, the USD is likely to appreciate particularly vis-a-vis the euro, as the ECB will have to ease monetary conditions at some point before year-end in order to meet its inflation target", added Barclays.