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Dec hike on the way - UOB

FXStreet (Guatemala) - Analysts at UOB Group noted the strong October US non-farm payrolls report that has led to markets now pricing in a December rate hike from the Fed as a 70% chance, triggering a sharp rise in the USD and a rise in yields along the curve.

Key Quotes:

"Overall, the 2-year yield is now around 0.89%, alongside a sharper increase in the 10-year yield towards 2.33%. Aside from the 271k increase seen in the headline measure, the 0.4% m/m increase in average hourly earnings are likely enough for policymakers trying to find any potential underlying inflation, providing some confidence that we will eventually make it back towards the Fed’s 2 percent target.

The solid employment report is a firm reaffirmation to a rate hike in December. We still expect the first Fed rate hike to take place in the 15-16 Dec 2015 FOMC and we keep our rate hike trajectory projection, bringing the FFTR to 0.5% by end-2015 and to 1.5% by end-2016 in lieu of the dot-plot chart revisions (as updated in the September FOMC)."

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