All eyes are on this Friday’s US labour market report, with the headline unemployment rate expected to tick up to 4.3% from the prior 4.2% in July. For months, the jobless rate has hovered just above the 4% mark, a signal that, at least on the surface, the American labour market remains robust. But beneath the surface, the pace of hiring has slowed noticeably. In July, the US economy added just 75 000 jobs, well short of the 105 000 expected.

This comes on the heels of sharp downward revisions to earlier figures, with June’s non-farm payroll gains cut dramatically from 140 000 to just 14 000. These figures point to a softer job creation environment than markets had anticipated, and investors will be watching this week’s release for any further signs of underlying weakness.

Fed Chair, Jerome Powell, said that the labour market remains “in balance,” but it is, as he put it, “a curious kind of balance that results from a marked slowing in both the supply of and demand for workers.” Powell cautioned that if these trends continue, “downside risks to employment are rising,” and any shift could lead to “sharply higher layoffs and rising unemployment.” Meanwhile, inflation remains steady, with July’s consumer price index coming in at 2.7%, lower than most analysts anticipated.

With expectations already in favour of a Fed rate cut at its September meeting, a soft labour report on Friday will reinforce a rate cut, which we judge to be likely. That would weaken the dollar, lifting the rand and other emerging market currencies. For now, the mood is watchful, and markets are bracing for a data print that could tip the balance for global investors and policymakers alike.