Hot. Hot. Hot. There was only one word to describe the US jobs report on Friday last week. 🔥

And in the context of recession worries, the numbers helped to allay fears to a certain extent despite the fact that GDP figures continue to disappoint in the US. One can argue that labour market data is always lagging but for now, policymakers can keep up with their ongoing narrative to markets: This isn't the recession you're looking for.

The dollar jumped higher alongside Treasury yields with USD/JPY looking to hold a push back above 135.00 in the new week. Is this where the dollar makes another run to the topside? Or is the post-NFP reaction going to fade?

All of that hinges on the US consumer inflation data on Wednesday. It is the second instalment of what the Fed has described as key economic releases to watch for before the September meeting. Next month, we'll do it again and run it back with another round of jobs data and inflation figures once more before the FOMC meeting.

For now, the dollar can breathe easier so long as the bond market plays ball and given the lack of other key drivers, it most likely will until we get to Wednesday.

Keep in mind though that while labour market conditions are still fairly optimistic, stagflation risks are continuing to build. There has been many comparisons to the current state of the economy to that in 1973 and this could yet be one of it. Something interesting to note is that in any year where the US economy created over 3 million jobs (as it has this year), never once did we see a recession. And only once did it go into a recession in the following year. Do you want to take a guess on when that was? That's right.. 1973.