In the European session, the main highlight will be the Eurozone flash CPI report. The CPI Y/Y is expected at 1.9% vs 2.0% prior, while the Core CPI Y/Y is seen at 2.2% vs 2.3% prior. The market continues to price out the chances of another rate cut with the probabilities now standing just around 38%. The improving economic data and risks of inflation tell the policymakers to proceed with caution now.

In the American session, all eyes will be on the US NFP report. The payrolls number is expected at 110K vs 147K prior, while the unemployment rate is seen at 4.2% vs 4.1% prior. The average hourly earnings Y/Y is expected at 3.8% vs 3.7% prior, while the M/M measure is seen at 0.3% vs 0.2% prior.

Fed Chair Powell stated that the Fed is focused on balance between the demand for labour and the labour supply. He said the unemployment rate reflects this balance. Therefore, focus on the unemployment rate.

We will also get the US ISM Manufacturing PMI after the NFP report but this is likely going to be ignored (unless we get big deviations) given that the focus is on the NFP and CPI reports. The ISM number is expected at 49.5 vs 49.0 prior.

Source: Forex Live