US employment report the next key focus for the Fed and markets

As the Fed continues in its data-dependent mode, next week's employment report (Friday) should take central stage. As we head into autumn, the Fed and markets will have only two more job reports to assess the likelihood of a September lift-off. The last ECI print confirmed that wage pressures are rather soft, and markets will seek re-assurance from the NFP report. 

"Our economists take comfort in the fact that the detailed breakdown of the data does not suggest a broad-based slowdown and note that the underlying pattern of wage inflation is quite different if sales categories are excluded," says Barclays.

On the data front, headline NFPs is expected to increase by 200k (consensus: 220k), with the unemployment rate remaining unchanged at 5.3% and wages increasing 2.3% y/y. On top of that, PCE core numbers will be released next Monday. A 1.2% y/y increase is anticipated, in line with market expectations. Manufacturing and service ISM (Monday and Wednesday respectively) should help confirm moderate but steady growth around 2%. 

"We see scope for some USD strength in the week ahead as markets reassess the probability of a September hike following Friday's sell-off," added Barclays.