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ING’s James Knightley notes that stronger-than-expected US August jobs data, with 162,000 new positions and upward revisions, has increased the perceived likelihood of a September Federal Reserve rate hike. He highlights steady unemployment at 4.1%, benign wage growth, and sector concentration in job gains. Knightley stresses that upcoming US inflation data will be crucial for the Fed’s final decision.

Strong jobs data supports hike risk

"The US added 162,000 jobs in August, above all expectations in the market, with an additional 55,000 of upward revisions to the past two months."

"Today has seen the release of a strong US August jobs report that makes a September Fed interest rate hike look a little more likely."

"Unsurprisingly, the market has moved to price 16bp of a 25bp rate hike, up from 12.5bp yesterday after Fed Governor Waller's relatively dovish comments whereby he suggested a soft inflation print could mean he votes for stable policy."

"With Fed Chair Kevin Warsh describing the US at full employment, this outcome has nudged expectations of a September rate hike higher, but the final decision hangs on next Friday's inflation print."

"Next Friday's CPI report will indeed be the key decider and the 0.4% month-on-month increase in headline prices and a 0.2% increase in core (ex food and energy) prices, which is what both we and the consensus predict, is probably not cool enough to prevent Warsh nudging the rest of the FOMC into a hike."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• GBP/USD claws back part of its post-NFP losses as the US Dollar trims its initial gains.
• Strong US jobs data lifts Fed rate-hike bets for the September 15-16 meeting.
• Attention shifts to US CPI and PPI data for clearer clues on the Fed’s next move.

GBP/USD recovers part of its initial drop on Friday after stronger-than-expected United States (US) employment data briefly lifts the US Dollar (USD). The pair fell to an intraday low of 1.3482 immediately after the release before rebounding. At the time of writing, GBP/USD trades around 1.3512.

US Nonfarm Payrolls (NFP) increased by 162K in August, almost three times the market forecast of 56K. July’s reading was revised to a gain of 21K from the previously reported 23K decline, while the Unemployment Rate held steady at 4.1%.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.11 after rising as high as 99.39 in response to the employment report, but holds above the more than one-week low of 98.83 touched on Thursday.

The short-lived decline in GBP/USD suggests traders are not fully convinced that the stronger employment figures will be enough to secure a Federal Reserve (Fed) rate hike this month. Recent comments from Fed officials indicate that policymakers are more focused on restoring price stability, making next week’s Consumer Price Index (CPI) and Producer Price Index (PPI) reports crucial for the September decision.

Recent inflation figures have shown some moderation. Fed Governor Christopher Waller said on Thursday that he is “finally seeing some signs of disinflation” and that the current interest-rate setting could bring inflation back to the Fed’s 2% target. However, Waller added that he would consider a September rate hike if the August inflation data comes in hot.

The strong jobs report has nevertheless pushed rate hike expectations higher. According to the CME FedWatch Tool, markets now see around a 60% chance of a 25-basis-point (bps) increase at the September 15-16 meeting, up from roughly 50% before the NFP release.

On the UK side, hawkish remarks from Bank of England (BoE) Chief Economist Huw Pill provide some support to the Pound Sterling (GBP). Pill reiterated his preference for raising the Bank Rate to 4%, although markets largely expect the BoE to leave rates unchanged at 3.75% later this month.

ING’s Warren Patterson and Ewa Manthey highlight that central banks, led by China and Poland, continued net Gold purchases in July, supporting structural demand despite a slower pace than last year. They add that Gold prices rose over 2% after weaker US employment data and comments from Federal Reserve official Christopher Waller suggesting openness to holding rates steady if inflation behaves.

Official demand and Fed rhetoric support

"Central banks continued to add to gold reserves in July, reporting net purchases of 23 tonnes, according to World Gold Council data. Emerging market central banks remained the main buyers, led by China and Poland. China's central bank extended its buying streak to 21 consecutive months, adding 20 tonnes."

"Although central bank buying has slowed compared to a year ago, official sector demand continues to provide support for the gold market. Ongoing reserve diversification efforts among emerging economies should help sustain structural demand, even if purchases moderate from recent highs."

"Gold prices rose more than 2% on Thursday following a weaker-than-expected ADP employment report on Wednesday. Comments from US Federal Reserve official Christopher Waller, suggesting he is open to keeping rates on hold at the next FOMC meeting (assuming no surprises on the inflation front), provided an additional boost."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• EUR/USD retreats as the US Dollar strengthens following upbeat US employment data.
• US Nonfarm Payrolls jump by 162K in August, sharply beating the 56K market forecast.
• Attention now shifts to next week’s US inflation figures and the ECB monetary policy announcement.

EUR/USD comes under selling pressure on Friday as the US Dollar (USD) strengthens following the release of the upbeat United States (US) employment report. At the time of writing, the pair trades around 1.1605, down roughly 0.18% on the day, after retreating from an intraday high of 1.1633.

US Nonfarm Payrolls (NFP) rose by 162K in August, comfortably beating expectations for a 56K increase. July’s reading was revised sharply higher to a gain of 21K from the previously reported 23K decline, while June payrolls were revised to 31K from 20K. The Unemployment Rate held steady at 4.1%, as expected.

The US Dollar strengthens following the employment report, while US Treasury yields also move higher across the curve. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.20 after falling to a more-than-one-week low of 98.83 on Thursday. Meanwhile, the benchmark 10-year Treasury yield retests 4.81%, its highest level since October 2023, touched earlier this week.

The stronger employment figures revive expectations that the Federal Reserve (Fed) could raise interest rates at its September 15-16 meeting. Still, the jobs report may not settle the September policy debate on its own. Next week’s Consumer Price Index (CPI) and Producer Price Index (PPI) data will give policymakers a clearer picture of inflation before the Fed announces its decision.

On the Euro (EUR) side, weaker-than-expected Eurozone Retail Sales add some pressure. However, expectations that the European Central Bank (ECB) will raise interest rates at its September 9-10 meeting could limit the Euro’s losses. The ECB is widely expected to deliver a second rate hike this year as higher Oil prices amid tensions in the Middle East keep inflation risks elevated.

• US Nonfarm Payrolls rise by 162K in August, well above the 56K increase expected.
• The Unemployment Rate remains unchanged at 4.1%, while annual wage growth eases slightly to 3.1%.
• The Japanese Yen remains supported by expectations of tighter monetary policy in Japan.

USD/JPY trades around 155.85 on Friday at the time of writing, virtually unchanged on the day. The pair remains stable despite the US Dollar's (USD) positive reaction to a much stronger-than-expected US employment report, as the Japanese Yen (JPY) retains support from expectations of monetary tightening in Japan.

United States (US) Nonfarm Payrolls (NFP) increased by 162K in August, according to data released by the Bureau of Labor Statistics (BLS) on Friday, compared with market expectations for an increase of just 56K. July's figure was revised to 21K, while June's reading was raised to 31K.

The report also showed that the Unemployment Rate remained unchanged at 4.1%, in line with expectations. The Labor Force Participation Rate rose to 61.6% from 61.4% previously. Meanwhile, annual Average Hourly Earnings growth eased slightly to 3.1% from 3.2% in July.

The substantial upside surprise in job creation provides immediate support to the US Dollar by easing concerns over a sharp deterioration in the US labor market. However, this boost is not enough to push USD/JPY significantly higher, as the strength of the Japanese Yen offsets the Greenback's positive reaction.

Societe Generale reports that USD/MXN has moved back below 17.00 as Mexican officials engage with US counterparts on trade issues following a widening US-Canada rift. The bank highlights a sharp drop in Mexico’s car imports from China after tariff adjustments aimed at protecting local jobs. President Sheinbaum remains optimistic on a trade agreement with the US, while the manufacturing PMI slipped back into contraction territory in August.

Tariffs and weaker PMI shape Peso

"USD/MXN returned below 17.00. Economy Minister Ebrard met US Commerce Secretary Howard Lutnick at the sidelines of the G20 summit to discuss trade after the widening of the US-Canada trade rift."

"Ebrard said that Mexico car imports from China fell 31.1% yoy in 1H26 to 158,571 units following tariff adjustments that were designed to protect roughly 350k local jobs from unfair trade practices."

"President Sheinbaum expressed optimism of reaching an agreement on trade the US soon."

"On data front, the manufacturing PMI returned to contraction mode, falling to 49.8 in August vs 51.3 in July."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• EUR/GBP snaps a four-day winning streak after reaching its highest level since July 1.
• Weak Eurozone Retail Sales weigh on the Euro, while hawkish remarks from BoE Chief Economist Huw Pill support the Pound.
• Diverging ECB-BoE policy expectations and UK fiscal concerns could limit the cross’s downside.

EUR/GBP trades on the back foot on Friday, snapping a four-day winning streak that pushed the cross above 0.8600 to its highest level since July 1. Softer-than-expected Eurozone Retail Sales data weighs modestly on the Euro (EUR). At the time of writing, EUR/GBP trades around 0.8590, down roughly 0.10% on the day.

Eurozone Retail Sales fell 0.6% MoM in July, missing expectations for a 0.3% increase and reversing the previous month’s 0.2% gain. On an annual basis, sales rose 0.6%, below the 1.1% forecast and slowing from 1.4% previously.

Bank of England (BoE) Governor Andrew Bailey offered no fresh signal about the next interest-rate decision on Friday. Bailey said policymakers have some choice over how quickly inflation returns to target, but stressed that it must do so. He also said high debt levels reflect substantial challenges facing governments and are adding to pressure on bond markets.

Hawkish comments from BoE Chief Economist Huw Pill on Thursday provide some support to the British Pound (GBP). Pill reiterated his preference for raising the Bank Rate to 4%, arguing that a “prompt increase in Bank Rate may head off some potential insidious catch-up dynamics.”

The downside is likely to remain limited as markets expect the European Central Bank (ECB) and the BoE to follow different policy paths at their upcoming meetings this month. Broader concerns over the UK fiscal outlook could also limit demand for the Pound Sterling (GBP).

The ECB is widely expected to raise interest rates for a second time this year at its September 9-10 meeting as policymakers respond to inflation risks linked to higher Oil prices amid tensions in the Middle East. In contrast, the BoE is expected to leave the Bank Rate unchanged at 3.75% on September 17. This policy divergence supports the EUR/GBP upside, while broader concerns over the UK fiscal outlook could also limit demand for the Pound Sterling.

Rabobank flags Pound vulnerability as UK budget looms

Rabobank strategists argue that the Pound is at a structural disadvantage compared with many of its G10 peers, noting that “GBP does not have this advantage” of a lower foreign ownership share in its government bond market. They highlight that “the proportion of UK government debt owned by foreign investors is relatively high compared with other G10 countries,” which in their view “increases the likelihood that any gilt market jitters will also be reflected in a weaker pound.”

Looking ahead, Rabobank expects the forthcoming fiscal event to be a key driver for the currency, stating that “the October 28 UK budget will remain front of mind for GBP markets in the weeks ahead” and, as a result, they “anticipate some discomfort for the pound.” The bank concludes that “together these factors suggest that GBP may be more sensitive to budget concerns than many of its G10 peers” and, “in view of the proximity of the UK budget next month and the uncertainties connected with it,” they “expect EUR/GBP to be biased higher, towards 0.87 on a 3-month view.”

Nonfarm Payrolls (NFP) in the United States (US) rose by 162K in August, the US Bureau of Labor Statistics (BLS) reported on Friday. This print followed July's increase of 21K and surpassed the market expectation of 56K by a wide margin.

Other details of the report showed that the Unemployment Rate remained unchanged at 4.1%, as expected, while the Labor Force Participation rate rose to 61.6% from 61.4%. Finally, the annual wage inflation, as measured by the change in the Average Hourly Earnings, declined to 3.1% from 3.2%.

"The change in total nonfarm payroll employment for June was revised up by 11,000, from +20,000 to +31,000, and the change for July was revised up by 44,000, from -23,000 to +21,000. With these revisions, employment in June and July combined is 55,000 higher than previously reported," the BLS noted in its press release.

Market reaction to Nonfarm Payrolls

The US Dollar (USD) Index gathers bullish momentum with the immediate reaction to the impressive Nonfarm Payrolls report. As of writing, the USD Index was up 0.3% on the day at 99.32.

This section below was published as a preview of the August Nonfarm Payrolls data at 08:30 GMT.

• US Nonfarm Payrolls are expected to rise by 56K in August, following July’s negative print.
• The Unemployment Rate is forecast to hold steady at 4.1%.
• US employment data could influence the market pricing of a potential Fed interest rate hike in September.

The United States (US) Bureau of Labor Statistics (BLS) is set to release the Nonfarm Payrolls (NFP) data for August on Friday at 12:30 GMT. 

With investors leaning toward a Federal Reserve (Fed) interest rate hike in September amid persistent uncertainty surrounding the inflation outlook, the underlying details of the employment report could influence how markets assess the US central bank’s policy outlook and drive the US Dollar’s (USD) valuation. 

What to expect from the Nonfarm Payrolls report?

Investors expect NFP to rise by 56K in August following July’s unexpected print of -23K. The Unemployment Rate is seen holding steady at 4.1%, while annual wage inflation, as measured by the change in Average Hourly Earnings (AHE), is projected to soften to 3% from 3.2%.

Nevertheless, the underlying details of the July employment report suggested that the labor market conditions were not as dire as they seemed initially because a majority of job losses were concentrated in government positions, especially in education due to seasonal variations in academic contracts and summer staffing shifts, and the leisure and hospitality sector.

According to TD Securities, August payrolls are expected to show a recovery, with the bank forecasting that "August NFP [will] rebound to 95k after July posted a decline of 23k." The team cautions that "risks to our payrolls forecasts appear hawkish, and we would not rule out an outsized positive surprise," suggesting the balance of risks is tilted toward stronger-than-expected hiring. At the same time, TD looks for labour market conditions to remain broadly unchanged, noting that "the Unemployment Rate rate likely went sideways at 4.1% with balanced risks."

How will the US August Nonfarm Payrolls affect EUR/USD?

While delivering his opening remarks at the Jackson Hole Symposium earlier this month, Fed Chair Kevin Warsh delivered a hawkish message, causing markets to reassess the probability of an interest rate hike in September. According to the CME FedWatch Tool, markets are currently pricing in about a 60% chance of a 25 bps rate hike on September 16, compared to 35% before Fed Chair Warsh’s speech.

Warsh’s insistence that the Fed must be “confident underlying inflation is moving to objective, or we have work to do,” alongside comments that it is “hard-pressed” to call financial conditions restrictive and that recent disinflation has not “meaningfully changed” underlying trends, pointed to a bias against rapid easing even as growth, consumer spending, and business investment remain solid. Overall, the tone reinforced a firm 2% PCE target and signals that resilient activity and loose credit conditions could keep the Fed cautious about cutting rates too soon, a configuration typically supportive of the US Dollar on a relative policy basis.

Hence, a significant negative surprise, with an NFP print below 10K, could cause investors to second-guess a Fed hike in September, even more so if there is an increase in the Unemployment Rate. In this scenario, the USD could come under renewed selling pressure heading into the weekend and allow EUR/USD to gather bullish momentum. Conversely, an NFP reading above 40K could be seen as ‘good enough’ for the Fed to keep its focus on taming inflation and support the USD.

Strategists at BNY Mellon stress that Friday’s US NFP report is now “the key release for rates, FX, and risk assets.” They note that “after last month’s soft employment print, another weak number could temper the hawkish repricing that followed Jackson Hole.” By contrast, BNY Mellon argues that “a firmer print would validate Warsh’s message that the Fed’s focus should be on the inflation side of the mandate,” reinforcing the recent shift in market expectations for the Dollar and the policy path.

However, TD Securities takes a more cautious view, arguing that a robust US jobs report alone is unlikely to shift the Fed’s near-term policy stance. The bank notes that “a strong payrolls report is a necessary but not a sufficient condition for the Fed to hike in September,” stressing that “the more important piece of the puzzle is inflation as part of the strength in the NFP can be considered to be a reversal of the July weakness.” 

“In the case of a +40-50k upward payrolls surprise to consensus median as we expect, historical sensitivity and current positioning would suggest +0.2% knee-jerk USD reaction on the day,” they add.

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD: 

“EUR/USD’s near-term technical outlook points to a slightly bullish stance but doesn’t highlight a buildup in momentum. The pair fluctuates near the middle line of the Bollinger Band and the Relative Strength Index (RSI) stays mostly flat slightly above 50 on the daily chart.”

“On the upside, the 200-day Simple Moving Average (SMA) aligns as a key resistance level at 1.1635 ahead of 1.1710 (upper line of the Bollinger Band) and 1.1800 (static level). Looking south, support levels could be spotted at 1.1560 (100-day SMA), 1.1500 (static level, 50-day SMA) and 1.1350 (static level).”

(This story was corrected at 09:35 GMT to revise the market expectation for August Nonfarm Payrolls to 56K from 58K due to a last-minute consensus change.)