Financial market research and analysis

The US labour data is the major macro event of the day.

The FX markets are in a wait-and-see mode before the US jobs data. The daily FX trading volume fell 5.5 percent to $5.1 trillion, according to the BIS report. We could expect a decent pick-up in speculative volumes before the weekly closing bell. Traders should be ready for two-sided volatility in the US dollar.

Of course, the USD appetite is expected to set the tone globally. The NFP figure generally triggers the knee-jerk reaction, while the unemployment rate and the earnings growth determine the amplitude and the sustainability of the first move.

The Federal Reserve (Fed) hawks lay await for solid macro data and further appreciation in the US dollar.

The US unemployment rate is expected to have further improved to 4.8% from 4.9% a month ago, while the average hourly earnings are anticipated to be 0.2% higher than the previous month. Unless we face a negative surprise regarding the unemployment rate and the wages data, the NFP figure, which is known to be less predictable, should determine the direction of a potential USD move in New York.

The consensus for the August nonfarm payrolls (NFP) is 180’000 versus 255’000 printed a month ago.

The twelve-month NFP average is circa 200’000.

A read above this level could be a stern call for a September Fed rate hike, if not, should set a high probability for a December rate hike.

A read in between 200’000 and 180’000 (consensus) should keep the Fed hawks in charge of the game. However, more dispersed speculative volumes could mist over the short-term bullish direction.

A read below consensus could discourage an immediate, further appreciation in the US dollar without however dismissing the possibility of at least one Fed rate hike before the end of the year.

The activity in the US sovereign market suggests a 34% probability for a September rate hike and almost a 60% probability for a December rate hike.