It is all about the NFP release today
The payrolls figure will once again steal the headlines initially but barring any shocks and/or surprises, I would say that the devil will be in the details when it comes to digesting the report as a whole.
A strong headline number plus solid readings in wages and the unemployment rate will no doubt provide an added lift to the dollar, after having seen such solid momentum already this week - even stretching key technical levels over the past few days.
But a strong headline number coupled with poor wages growth will make for a more interesting market reaction in the aftermath. The Fed has brushed aside rising inflation as temporary, yet they stepped up rate projections in their last meeting in June.
As such, one can argue that there can't be lasting inflation without wages and that may make the figure a more important detail to pay attention to than the payrolls number itself as well as the unemployment rate.
If there were to be a lasting market reaction, both in the dollar and Treasuries, to anything, it is likely to come if wages do show some kind of major beat/miss.
That should be able to convince some quarters of the market that the Fed needle is moving but again, this is just one report which is still marred by the effects of the pandemic.
It will take more for the market to be sure but the other thing to remember is that we are running out of time in trying to price in such certainty.
Jackson Hole is just around the corner and some market participants expect a general shift in tone by the Fed then. Perhaps this is what is needed to kick start that drive in expectations and when you think about it, maybe it has already begun for the dollar.