US employment report to be next key focus

As the Fed continues in its data-dependent mode, the employment report is crucial. 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. 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.

On the data front, headline NFPs are expected to increase by 200k, 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 releasing.

"A 1.2% y/y increase is anticipated, in line with market expectations. Manufacturing and service ISM should help confirm moderate but steady growth around 2%. A scope for some USD strength is seen as markets reassess the probability of a September hike following Friday's sell-off", says Barclays.