The Dow Jones Industrial Average shows that Wall Street generally expects non farm payrolls to increase by 161000 in August, and the unemployment rate to slightly decline to 4.2%.

However, recent data (including significant downward revisions to previous data) indicate a sharp slowdown in recruitment rates and pose some downside risks to this forecast.

On the contrary, the market is confident that the Federal Reserve will start cutting interest rates within a few weeks, and may significantly lower rates, depending on Friday's non farm payroll report results.

The market will also pay attention to the salary section in Friday's report, although it is no longer an important issue recently with the easing of inflation. The market generally expects the average monthly hourly wage rate in the United States to be 0.3% in August, higher than the previous value of 0.2%; The average annual hourly wage rate in August was 3.7%, higher than the previous value of 3.6%.

Shengbao Bank provides its own analysis on the impact of non farm payroll on the financial market in August.

SaxoBank stated that if the non farm payroll report for August is stronger than expected, with job growth exceeding 165000 and the unemployment rate falling to or below the consensus level of 4.2%, then this could be negative news for those hoping for a significant rate cut.

The unemployment rate is a key focus, as the recent rise has triggered the 'Sam's Rule', which is a sign that the US economy is heading towards recession. The market is currently leaning towards the expectation of a weaker US labor market, which means better than expected employment reports may reduce the likelihood of a significant interest rate cut this year.

SaxoBank stated that for example, if the non farm payroll growth rate in the United States in August is significantly lower than 165000, or if the unemployment rate remains high, it may prompt the market to digest the expectation of a 50 basis point rate cut in September and further significantly reduce interest rates before the end of the year. The weak labor market will support reasons for further interest rate cuts. Meanwhile, due to growing concerns about US economic growth, the US stock market may continue to sell off. Due to the increasing expectation of interest rate cuts by the Federal Reserve, the US dollar may face further pressure; As investors turn to safe haven assets to cope with increasing economic uncertainty, gold may be supported.

Daily chart of the US dollar index