Momentum for 2015 US rates rise gathers pace on central banker comments

Friday, November 06, 2015

Encouraging comments from Fed officials in recent days has improved the prospect of a December rate rise among market participants. Following on from the hawkish comments offered up by Fed Chair Janet Yellen, NY Fed President William Dudley and Fed Vice Chair Stanley Fischer echoed similar rhetoric, stating rates could be increased as early as next month while inflation is not far off the target rate. Yesterday’s jobless claims data could be seen as a blip on the horizon after initial weekly jobless claims increased 276K during the week ending October 31st, slightly more than the 262K expected by market participants.

All eyes will be firmly fixed on today’s non-farm payrolls and unemployment data with the latest Bloomberg poll indicating commentators expect 185K, a substantial improvement from the previous months figure of 142K. Market participants also expect the US unemployment rate to fall modestly from 5.1% to 5.0% in October. Provided releases are in line with consensus estimates the expectation for a December rates rise could continue to build with the encouraging outlook reflected in the USD index which has pushed above 98.00 early on this morning ahead of today’s releases.

The Bank of England struck a surprisingly dovish tone yesterday after holding rates unchanged and offering additional insight in its Inflation Report. Governor Mark Carney expressed his concerns regarding the slowdown in China, which had also prompted the Fed to offer a cautious outlook earlier this quarter, stating that efforts to rebalance its economy could risk hurting the banking sector while contagion risk to other economies also presented a credible threat. Sterling took a significant hit against the dollar as market participants digested the bearish commentary, sending the pound 1.1% lower against the USD towards 1.5208. Activity early on this morning has seen the pound give up further ground against the greenback ahead of jobs market data, trading around 1.5180 at the time of writing.

Initial weekly jobless claims rise towards the end of October

INJCJC Index US Initial Jobless 2015 11 06 08 10 47

Sterling plummets against USD on dovish BOE comments

GBP Curncy British Pound Spot 2015 11 06 08 26 41

Events for today

0500

JP

Sep

Leading Index

0700

DE

Sep

Industrial Production

0930

UK

Sep

Industrial Production

0930

UK

Sep

Trade Balance & Non EU

1330

US

Oct

NF Payrolls & Unemployment

1500

UK

Oct

NIESR GDP Estimate

2000

US

Sep

Consumer Credit

Topics: US Fed, BoE, GBP, Unemployment
More from: Kash Kamal