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Fed rate hike coming in December – Swissquote

FXStreet (Delhi) – Yann Quelenn, Market Analyst at Swissquote, suggests that the good US jobs report has increased the probability for a rate hike in December, which has jumped to almost 68% according to Bloomberg.

Key Quotes

“Last Friday’s jobs report printed at an astonishing 271k, while it was expected at 185k. Markets was already pricing in a weak read as what happened in September. Better Jobs data is what the Fed is looking for as this should fuel inflation. The unemployment rate is still very low at 5% but has failed to drive up inflation for now.”

“Fed member John Williams said in a speech that was held Saturday that a rate hike should be the next appropriate step. According to him, another set of good data, as we have seen last Friday, would be sufficient to meet the Fed’s forecast and would could bring an end to the zero interest-rate policy in place since the end of 2008.”

“Yet, Williams also confirmed its concern about the current low inflation. Indeed, we also remain cautious as inflation is still way too low regarding the Fed’s target of 2%. In addition, the global outlook remains uncertain, in particular global growth that is likely to have a deeper impact in the United States economy.”

“In other words, we consider that U.S growth is still vulnerable. Meanwhile, the dollar has soared on new Fed expectations and the euro is now holding below 1.0800 dollar. We think that a rate hike is largely overestimated we expect a retracement to 1.0900.”

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