Friday’s Non-farm payroll release points to some easing in labor market conditions, amid signs of moderating demand and rising supply. August’s print came in broadly inline with expectations at 187,000, however a sharp increase in the participation rate to 62.8% and above consensus unemployment rate at 3.8% grabbed the headlines. The US dollar rallied after the data release with EURUSD dropping below 1.08 and GBPUSD briefly dropping below 1.26 and close to support at 1.2550 before rallying. The Japanese yen also lost ground against the resurgent greenback, pushing USDJPY through the 146 level again. The print also triggered a sharp move lower in treasury yields which had been surging in recent sessions.
It is likely to be a quiet start to the week, with US markets closed for the labor market holiday. Similarly, we have no significant UK or European data releases in the coming days so markets will likely be influenced by US releases towards the end of the week. Wednesday’s US ISM Services index is expected to come out in line with July’s print at 52.7, following a six-month low in the flash services PMI. We also look forward to the release of the Fed’s Beige Book for further clues on the strength of the US outlook. Thursday’s Initial Jobless Claims wraps up the week, with no significant releases on Friday.
Have a good week.