US Jobs Report: High-Stakes Payrolls Set Stage for Market Reactions

The upcoming US jobs report is expected to have significant implications for market reactions and Federal Reserve policy. With Federal Reserve Chair Kevin Warsh's ambiguous communication, markets are highly sensitive to data releases like today's payrolls.

A strong reading could reinforce expectations of a September rate hike, while a weak one might unwound those expectations. The market consensus is around 80,000 new jobs, with our forecast at 70,000. A modest rise in unemployment to 4.3% on a higher participation rate would result in a slightly softer dollar.

The main drivers behind the current USD strength were primarily some souring in risk sentiment and an oil rebound on poor Gulf headlines. However, some precautionary dollar buying into today's data event might have played a part. Our call remains one of USD weakness in the next couple of months as we expect the Fed to stay on hold this year.