The US Bureau of Labor Statistics (BLS) will release the closely watched Nonfarm Payrolls (NFP) report for August on Friday at 12:30 GMT. The data is set to play a decisive role in shaping expectations for the Federal Reserve’s upcoming interest rate decision later this month.
Market expectations
Economists project that Nonfarm Payrolls will rise by 75,000 in August, following a modest 73,000 increase in July. The Unemployment Rate is forecast to tick up to 4.3% from 4.2%, marking further signs of softening in the labor market. Meanwhile, Average Hourly Earnings (AHE), a key gauge of wage inflation, are expected to grow 3.7% year-on-year, easing from July’s 3.9% pace.
Analysts at TD Securities, however, anticipate a much softer report, with just 25,000 jobs added in August. They highlight potential drags from the manufacturing, professional services, and government sectors. TD also expects the unemployment rate to hold steady at 4.2%, with wage growth slipping to 3.8% annually.
Fed policy implications
The US Dollar has staged a recovery from five-week lows against major peers ahead of the jobs data, weighing on EUR/USD. Market consensus points to a 25-basis point Fed rate cut in September, with CME’s FedWatch tool assigning a 90% probability to such a move. Still, weak jobs data could increase calls for a larger 50-bps reduction.
At the Jackson Hole Symposium, Fed Chair Jerome Powell underscored rising risks to employment and slower GDP growth tied to weaker consumer spending. He warned that labor market risks “can materialize quickly,” leaving the Fed ready to respond with further rate cuts if needed.
Recent data highlights
This week’s US data has painted a mixed picture of the economy:
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ISM Manufacturing PMI: Edged up to 48.7 in August from 48.0 but missed forecasts of 49.
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JOLTS Job Openings: Fell to a 10-month low of 7.181 million in July, below expectations of 7.4 million.
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ADP Payrolls: Showed private sector jobs rising by only 54,000 in August, well short of the 95,000 estimate.
The combination of weak labor demand and slowing hiring momentum adds weight to Friday’s NFP release as a critical guide for the Fed.
Market reaction scenarios
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Soft print (<50K, higher UE): Could fuel speculation of a 50-bps rate cut, triggering USD weakness and extending the record rally in Gold.
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Stronger print (>100K, UE steady at 4.2%): Would counter expectations of aggressive easing, strengthening the USD and sparking a pullback in Gold.
EUR/USD technical outlook
Dhwani Mehta, Asian Session Lead Analyst at XtremeMarkets, notes that EUR/USD is consolidating near 1.1665 — the confluence of the 21-day and 50-day Simple Moving Averages (SMA). The 14-day RSI remains above the midline, suggesting a neutral-to-bullish bias.
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Upside levels: Break above 1.1700 could extend gains toward the August high at 1.1743, then July 24 peak at 1.1789.
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Downside levels: Initial support lies at 1.1600, followed by the 100-day SMA at 1.1521. A sustained break lower could expose the 1.1450 psychological zone.
