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(Sharecast News) - With no FTSE 350 corporate releases due, all eyes will be on the non-farm payrolls report for July on Friday, along with average earnings and the unemployment rate.
Market expectations are for payrolls to have increased by 80,000 in July following a 57,000 jump in June, and for the unemployment rate to remain steady at 4.2%.
Kathleen Brooks, research director at XTB, said: "This is a pivotal release for financial markets, and there are four things in this report that are worth watching. These include the payrolls number, the unemployment rate, wage growth and the labour force participation rate.
"This data will help to define the future of Fed policy, and could be a major market-moving event, especially since the Fed is no longer offering forward guidance. The Fed is particularly worried about demand side inflation fears and a wage-price spiral, so the wage data is worth watching closely."
Patrick Munnelly at Tickmill Group said a soft headline would support the view that labour demand is cooling.
"But if unemployment stays low, participation remains noisy, and wage growth is sticky, the Fed will still be able to argue that inflation deserves priority," he said. "The hawkish dissenters from last week's FOMC meeting are unlikely to be dissuaded by the data so far.
"Fed commentary reflects that tension. Mary Daly, a non-voter from San Francisco, outlined a scenario where she would be prepared to support a rate hike, but she also stressed that she was 'completely supportive' of last week's decision to hold. Her central case remains that the current inflation bout is short-lived. That makes her hawkishness conditional rather than immediate."
Munnelly noted that Lisa Cook, by contrast, sounded closer to action, while Neel Kashkari also kept the hawkish pressure alive, telling CNBC that the Fed should consider gradually increasing rates to rein in price pressures.
"After last week's three hawkish dissents, this matters because it suggests the hawkish bloc may not be isolated. The Committee's centre may still prefer patience, but the bar for continued patience is rising," he said.
Also on Friday, Chinese trade data for July will be released.