Unemployment remained at 4.1%, in line with expectations. Employment data for July was revised from a fall of 23 thousand to an increase of 21 thousand.

The report became the last major macroeconomic benchmark before the Fed meeting on September 15-16 - and significantly changed the balance of power in the market. Before the data, traders had pegged the likelihood of the rate remaining at 60-70%, with a 25 basis point hike seen as the main alternative amid inflation still holding above the Fed's 2% target. After unexpectedly strong employment figures, market participants began to more actively include in quotes the option of a rate increase in September, rather than a pause.

Additional pressure on expectations is exerted by the position of Fed Chairman Kevin Warsh: following the July meeting, three out of twelve committee members voted for an immediate rate increase, and Warsh himself described the disagreements within the FOMC as a “good family quarrel.” The publication of August employment data deprives supporters of a pause of the main argument - the weakness of the labor market, on which they relied after the disastrous July report.

The reaction of the foreign exchange market was quick and unidirectional in favor of the dollar. The dollar index turned upward immediately after the report was released, adding 0.31% and returning to 99.31 points.

The USD strengthened against most currencies: the EUR/USD pair fell by 0.28% to 1.1593, GBP/USD by 0.22% to 1.3495, AUD/USD by 0.17% to 0.7188. The dollar rose 0.43% against the yen to 156.51 yen and against the Turkish lira by 0.24% to 48.44.

The Fed's final decision on the rate will become known on September 16; Until this point, the market will play out the remaining inflation data as the last factor that can tip the scales between a pause and a rate hike.