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US jobs report to take centre stage

In my view, Friday’s jobs numbers may be the single most important data release before the Fed’s September meeting. Global markets will be interested in the unemployment rate, which they view as the determining factor between a 25bp or 50bp interest rate cut in September. The reverberations from the decision to ease the policy rate has historically impacted the USD.

NatWest’s US economists expect a rise in the unemployment rate to 4.4% on Friday (compared with the Bloomberg consensus of 4.2%) triggering a series of 50bp rate cuts this year. This is more easing than the market is currently pricing, according to interest rate futures markets. For the USD, this looks to me as a building headwind.

Before we get Friday’s US employment data, we’ll get official US job openings data on Wednesday and (independent) ADP employment change numbers on Thursday. Traditionally these aren’t a focus for markets, but that may change as the attention shifts towards the labour market. 

GBP looks at the mercy of development elsewhere this week.

It’s a fairly clear UK data calendar this week with revised construction and service sector Purchasing Managers Index (PMI) data being the highlight. For me, the service sector PMI is likely to be the more market moving data release given the make-up of the UK economy. Nevertheless, with the calendar in general quiet, GBP may be influenced by events elsewhere, like Friday’s US jobs report.

Also watch out for Thursday’s Bank of England (BoE) monthly decision-maker panel CPI inflation expectations report.

Little euro data before the ECB’s blackout period

Expect a light European data calendar ahead of the European Central Bank’s (ECB) blackout period. This is when the Governing Council avoids making comments that could influence expectations of a monetary policy decision (next on the 12 September). NatWest European economists expect the ECB to deliver a well-telegraphed 25bp cut.

The week’s data calendar includes final PMIs, final Q2 GDP growth, July retail sales, July producer prices, and national releases including German factory orders and German industrial production.

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