Friday's US jobs report provided more fodder for critics who say the Fed missed the right time to cut interest rates for the first time. Job growth in July was much weaker than expected, June's figure was revised downwards and the unemployment rate rose from 4.1% to 4.3% – ultimately triggering the Sahm rule, Commerzbank’s FX strategist Michael Pfister notes.

Two Fed rate cuts in September and November

“The release was followed by a flurry of action. The market moved up its rate cut expectations significantly and now expects more than four rate cuts of 25 basis points by the end of the year. In practice, the market is now leaning towards two rate cuts of 50 basis points each in September and November, fuelled by changes in the forecasts of major banks. There has even been talk of an emergency cut ahead of the September meeting.”

“Fortunately, after this exciting week, we should be in for a quieter few days. Hopefully, once the excitement has settled a little, market participants will realise that expectations have gone a little too far. I'm not saying that the jobs report didn't give me cause for concern. Clearly, the labour market has weakened in recent months, which does not bode well for the US growth advantage.”