Week ahead: Nonfarm payrolls to provide key to Fed’s September decision

The US nonfarm payrolls report is the highlight for traders this week as it should deliver a steer on what the Federal Reserve might do next after last week’s comments from Jay Powell at Jackson Hole. Market pricing suggests a roughly 50/50 chance the Fed will go for 75bps at its September 21st meeting, but a soft payroll report could nudge expectations back towards 50bps.  

Here are the week’s key events: 

Monday 

Australian retail sales figures is the first release of the week on an otherwise quiet day for data. In Europe, traders await the German retail sales and import prices data, whilst the London Stock Exchange is shut for a Bank Holiday in the UK, which might keep volumes in equity derivatives and forex markets thin for the bulk of the European session. 

Tuesday 

The main focus is the flash/preliminary CPI inflation numbers for Germany, France, Spain and Italy at the start of the European session. Later in the day there is the US CB Consumer Confidence survey, which last month registered a third-straight decline, with expectations sliding to an-almost decade low. Meanwhile JOLTS Jobs Openings will be watched for clues as to how the US labour market is holding up as the Federal Reserve tightens interest rates. 

Wednesday 

Chinese manufacturing and services data is the highlight of the Asian session alongside Japanese industrial production and retail sales numbers. Later on, we get the flash Eurozone inflation numbers. In the afternoon session on Wall Street traders look to the ADP nonfarm employment report ahead of this week’s NFP release, as well as the Chicago PMI. Weekly crude oil inventories from the US are also on tap. 

Thursday 

The Asian session will focus on the China’s Caixin manufacturing PMI, ahead of final PMI readings from the Euro area at the start of European trade. Weekly US unemployment claims come ahead of the start of trade on Wall Street and the latest US manufacturing PMI. 

Friday 

August nonfarm payrolls are the focus as markets look to see what labour market strength or weakness might mean for the Federal Reserve’s upcoming September meeting. Whilst the Fed might become more sensitive to some softer economic data, the payrolls report will be central to market expectations for whether it opts to raise rates by 75bps or 50bps when it next meets. Jobs growth in 2022 has been exceptionally strong, giving the Fed plenty of room to raise rates aggressively. Total nonfarm payroll employment rose by 528,000 in July, larger than the average monthly gain over the prior 4 months, which was already a robust 388,000.
 

Economic calendar (BST)