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11 May 2015
Payrolls point to a September hike – Danske Bank
FXStreet (Edinburgh) - In the view of Signe Roed-Frederiksen, Senior Analyst at Danske Bank, the Fed could hike in September following the result of April’s Payrolls.
Key Quotes
“Another 223,000 was added to US employment in April and the unemployment rate declined one notch to 5.4%. The net revision to March and February was -39,000”.
“This leaves three-month average monthly job growth at 191,000, which is just below the pace we think marks the threshold for a first Fed funds rate hike”.
“However, if we are right that US economic growth will rebound this quarter, the pace of job growth should remain above 200,000 in coming months”.
“Markets reacted by sending US rates lower. It is likely expectations on job growth were lifted by the release of strong jobless claims data on Thursday and there was some payback after the increase in yields over the past one and a half weeks”.
“Looking ahead, we continue to expect a first Fed funds rate hike in September, which is earlier than the current market pricing of a December hike”.
“More important though, the pace of rate hikes implied by market rates is in our view too slow. Thus, we expect history to repeat itself and rates to move higher across the curve in coming months, most pronounced in the 2-5Y segment, as we move closer to the first rate hike”.
Key Quotes
“Another 223,000 was added to US employment in April and the unemployment rate declined one notch to 5.4%. The net revision to March and February was -39,000”.
“This leaves three-month average monthly job growth at 191,000, which is just below the pace we think marks the threshold for a first Fed funds rate hike”.
“However, if we are right that US economic growth will rebound this quarter, the pace of job growth should remain above 200,000 in coming months”.
“Markets reacted by sending US rates lower. It is likely expectations on job growth were lifted by the release of strong jobless claims data on Thursday and there was some payback after the increase in yields over the past one and a half weeks”.
“Looking ahead, we continue to expect a first Fed funds rate hike in September, which is earlier than the current market pricing of a December hike”.
“More important though, the pace of rate hikes implied by market rates is in our view too slow. Thus, we expect history to repeat itself and rates to move higher across the curve in coming months, most pronounced in the 2-5Y segment, as we move closer to the first rate hike”.