A Market on Edge After Jackson Hole
The new trading week, from September 1 to 6, 2025, opens with the dollar under pressure after Powell’s dovish tilt at Jackson Hole. His remarks highlighted rising employment risks and downplayed inflationary effects of tariffs, fueling bets that the Fed is set to cut rates in September. Treasury yields slid, equities surged, and risk-sensitive currencies rallied. This week, the focus turns to whether incoming U.S. data justifies those dovish bets, with Friday’s Nonfarm Payrolls (NFP) the centerpiece.
Monday – Europe Takes the Stage
With U.S. markets closed for Labor Day, attention shifts to the euro area and the UK. The Eurozone HCOB Manufacturing PMI is expected to print at 50.5, barely holding above the expansion threshold, while the UK’s S&P Global Manufacturing PMI is forecast at 47.3, still in contraction. Misses in these reports could weigh heavily on EUR and GBP, particularly as investors brace for a potentially dovish Fed trajectory. Eurozone Unemployment, projected steady at 6.2%, adds another layer of risk if it unexpectedly ticks higher.
Tuesday – ISM and Factory Orders in Focus
Tuesday brings a wave of U.S. releases, with the ISM Manufacturing PMI, prices index, and Factory Orders due. Any softening in ISM would confirm that U.S. manufacturing remains under stress, compounding the Fed’s dovish tilt. Meanwhile, in Europe, flash HICP inflation will be closely watched. Markets expect headline inflation to stay around 2% YoY. A hotter print would complicate the ECB’s dovish stance, while a soft reading could accelerate euro weakness.
Midweek – Jobs Market Hints
Wednesday brings the JOLTS job openings report and the Fed’s Beige Book, both critical to understanding labor-market dynamics. JOLTS are forecast to remain subdued, reflecting fading labor demand. Later that evening, speeches from Fed officials Musalem, Kashkari, Williams, and Goolsbee could provide hints about how unified policymakers are after Powell’s Jackson Hole comments.
Thursday – Services PMI and Claims
Thursday sees the release of ADP private payrolls, forecast at 104K, along with weekly jobless claims and the ISM Services PMI. A strong ADP print would bolster expectations for resilience in private hiring, potentially steadying the dollar ahead of Friday’s NFP. But higher jobless claims or a weak services read could deepen USD losses. In Europe, Retail Sales (July) are expected to rise 0.3% MoM, offering a modest reprieve for the euro if realized.
Friday – The Decisive Jobs Report
Friday’s Nonfarm Payrolls is the week’s marquee release. Markets expect 75–78K jobs added, with unemployment either steady at 4.3% (Reuters baseline) or dipping slightly to 4.2% (consensus forecasts). Wage growth of 0.3% MoM is projected. A stronger-than-expected payroll number would reinforce the view that the Fed should remain cautious, driving USD gains against the euro and yen. A miss, however, would virtually lock in a September cut and weigh heavily on the dollar.
Alongside NFP, the UK prints Retail Sales, forecast to rebound 0.9% MoM. Strong consumption data could offset weak manufacturing, lifting GBP/USD—unless the dollar rallies on robust U.S. jobs.
Global Backdrop and Political Risk
The Fed’s independence remains in the spotlight after Trump’s escalating clash with policymakers, including his attempt to remove Governor Lisa Cook. A U.S. appeals court ruling that many Trump tariffs are illegal also adds uncertainty, with possible implications for inflation and trade flows. In Europe, French political instability could roil the euro, while Japan remains subdued with only household spending data and a speech by BoJ Deputy Governor Himino.
Trading Implications
The dollar’s trajectory will be dictated by labor data. If NFP meets or undershoots expectations, dovish momentum will carry EUR/USD toward 1.18, GBP/USD toward 1.36, and USD/JPY below 146. Stronger U.S. numbers, however, would flip the script, boosting the dollar and forcing a retracement in euro and sterling rallies. Traders should brace for sharp swings and thin liquidity, particularly early in the week with U.S. markets closed.
