Why the jobs report will decide the markets' tempo in the coming weeks

The market will be laser-focused on the employment report Friday before the market opens. After another turbulent week of tweets, threats and tariffs, the markets are finally settling down to the business at hand.

Friday's nonfarm payrolls report for March could set the cadence for all capital markets for the next few weeks. The key takeaway for equity, fixed income and currency traders will be the state of the U.S. worker: Are wages finally starting to rise in consistently?

The market is looking for only a meager 0.2 percent gain in wages. If that's all we get, the risk-on rally in stocks and currencies could hit a snag as markets will continue to question whether the Federal Reserve has the data to pursue its normalization policy.

On the other hand, if wages rise by 0.4 percent, the news could boost equities and the dollar with a massive rally into the week's close.

Higher wages will suggest that U.S. recovery will have the fuel to continue into the second quarter, and investor sentiment should perk up markedly as growth and earnings will be revised higher.

Furthermore, real average hourly earnings rose both on a month-over-month and year-over-year basis in February, reflected in prior employment reports. If average hourly wages — which last came in at $22.40 — can climb by just one thin dime to $22.50, this would translate to 2.7 percent annual wage growth and place markets in an overall ebullient mood.