US February employment report is due out later at 1330 GMT

Here are some numbers you need to know ahead of the release:

  • NFP estimate 205k; prior release 200k
  • Average estimate 206k
  • Highest estimate 300k
  • Lowest estimate 160k
  • Standard deviation 22.8k
  • Unemployment rate estimate 4.0%; prior release 4.1%
  • Participation rate was 62.7% prior
  • Average hourly earnings m/m estimate +0.2%; prior release +0.3%
  • Average hourly earnings y/y estimate +2.8%; prior release +2.9%

Don't mean to sound like a broken record but once again, the devil will be in the details - not on the headline print. More specifically, all eyes will be on the wages data.

Last month we saw wage growth spike and that led to the dollar rallying on the offset before reversing the move a couple of hours later. Equity markets were hammered as Treasury yields rose on signs that inflation may be ticking upwards after all.

A lot has changed in the market since then but the focus will still be on the average hourly earnings data. Inflation continues to be the driving force for the Fed to raise rates, and indicators of inflationary pressures don't come any bigger than this.

The release here is going to set the tone for expectations ahead of the FOMC meeting this month. The market's base expectation is for three rate hikes, and the first one should be delivered on 21 March. But it will be the dot plots projection that the market will look towards and the Fed's outlook on future hikes.

If wage growth is solid again, it builds the case for the market to expect the Fed to shift towards four rate hikes this year instead - as it seeks to keep up with Trump's fiscal policies. The problem for the Fed is that there is now added uncertainty on the trade front, and there is still the underlying problem of the twin deficits.

But the market will be looking for clues in the jobs report today to justify the case for an outlook of four rate hikes (and possibly more?). While a rate hike is already baked in for the March meeting, the summary of economic projections and the Fed's statement will be the biggest points of interest to the market.

It's going to be a tough balancing act for the Fed this year, more so if Trump is looking for a weaker dollar as the answer to solve the issue of the deficit. There's still a lot to ponder upon, but the jobs report here will be crucial in terms of setting the market expectation for the FOMC meeting.

Do note that tomorrow begins the Fed's blackout period, and all there's left on the agenda today is Fed's Eric Rosengren and Charles Evans (speaking twice to Bloomberg and at a discussion on the economy and monetary policy).