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Weekly Market Outlook: Eyes on NFP After Powell’s Hawkish Speech 

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Weekly Market Outlook – Central banks will be stepping off the scene this week, which directs attention to economic data. The main highlight of the week will be the NFP report on Friday. Labor market data will be again in focus after Powell’s hawkish speech at Jackson Hall which signaled no intentions to slow down the aggressive tightening bias as long as inflation remains above targeted levels. 

Key Data to watch on the economic calendar this week

  • German Prelim CPI
  • US Consumer Confidence
  • Eurozone CPI Flash Estimate
  • US ISM Manufacturing PMI
  • US Non-Farm Payrolls 

USD  Approaches New 20-year Highs After Hawkish Signals 

The US Dollar index marched higher following the hawkish comments of Fed Chair Jerome Powell last week. Powell stated that the Federal Reserve has no intention to stop raising interest rates until the economy is back under control. Fed official are more focused on taming the accelerating inflation even though the tightening moves will cause the economy to slow down and affect households and businesses, as well as weakening the job market.

Powell’s speech has revealed that the Fed will choose cooling down inflationary pressures over economic growth and won’t allow the “far greater pain” that would result from letting inflation continue at high levels.

The Federal Open Market Committee’s (FOMC) overarching focus right now is to bring inflation back down to our 2 percent goal. Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. The burdens of high inflation fall heaviest on those who are least able to bear them.

USD traders will be watching the non-farm payrolls scheduled on Friday to assess how far the labour market has been affected with the slowing economy and elevated inflation. The economy is expected to add 295,000 jobs in August, the lowest job gain year-to-date. 

Meanwhile, the unemployment rate is expected to remain at its lowest since February 2020 at 3.5%. 

Speeches of several Fed officials will also be in focus after Powell’s signals that the tightening cycle is far from done, fueling market expectation that another 75 bps rate hike is on the table. 

EUR Below Parity as Economy Deteriorates 

For Europe, it is a busy week as traders are watching key updates on inflation, unemployment and Manufacturing PMIs. The flash estimates for CPI are set reflect further increases to a new high of 9% in August from 8.9% in July, as energy prices hit new highs. 

The EUR/USD fell below parity once again, hovering at 20-year lows as growth outlook remains gloomy, inflationary pressures at unprecedented levels and economic growth is threatened by higher prices and geopolitical tensions.

The ECB raised the interest rates by 50 basis points in line with its commitment to the price stability mandate. Board members argued that “further normalisation of interest rates will be appropriate.”

The central bank will be meeting on Sep 8th and is widely expected to deliver another rate hike if inflation keeps crawling higher. 


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