August Non-Farm Payrolls Preview: US and Canada Data on Deck

The countdown to jobs Friday is nearly over, with US and Canadian employment data set to be released shortly.

USD/JPY is still drawing attention, having moved more than 100 pips from yesterday's low following further turbulence in Asia. Macro traders are likely to steer clear of that pair after the report, in my view.

Elsewhere in FX, the landscape is mostly flat. The euro has slipped 2 pips on the day to 1.1622, and similar moves are seen across other currencies.

In fixed income, the picture is different: two-year yields have risen 2 basis points to 4.35%, trading at the day's highs. Waller yesterday played down the influence of the jobs report on his outlook, barring a major surprise, but the non-farm payrolls release still matters given the wage component's inflation clues.

A preview of the August non-farm payrolls is available here, delving into the figures and seasonal patterns. In my view, the market could tilt toward the Fed holding rates if the reading comes in around +10K or lower, though revisions add complexity. That might introduce political considerations since the subsequent meeting falls near the midterms.

Lastly, the 61.4% labor force participation rate remains a concern for the US economy, and any further decline would draw greater scrutiny. However, it is a longer-term issue and not a market mover.

On the Canadian side, the Bank of Canada kept rates unchanged this week, but a hike is fully priced in for year-end, with slightly more than one increase expected. Recent employment data have been strong, and the latest USMCA dispute is unlikely to have an impact until September. I suspect some overshooting in the recent Canadian numbers, but the July print of +75.1K leaves plenty of room for a weaker reading today without triggering a major reassessment. Still, a miss could weigh on the Canadian dollar.