US Dollar: Jobs strength lifts hike odds – ING

ING’s James Knightley notes that stronger-than-expected US August jobs data, with 162,000 new positions and upward revisions, has increased the perceived likelihood of a September Federal Reserve rate hike. He highlights steady unemployment at 4.1%, benign wage growth, and sector concentration in job gains. Knightley stresses that upcoming US inflation data will be crucial for the Fed’s final decision.

Strong jobs data supports hike risk

"The US added 162,000 jobs in August, above all expectations in the market, with an additional 55,000 of upward revisions to the past two months."

"Today has seen the release of a strong US August jobs report that makes a September Fed interest rate hike look a little more likely."

"Unsurprisingly, the market has moved to price 16bp of a 25bp rate hike, up from 12.5bp yesterday after Fed Governor Waller's relatively dovish comments whereby he suggested a soft inflation print could mean he votes for stable policy."

"With Fed Chair Kevin Warsh describing the US at full employment, this outcome has nudged expectations of a September rate hike higher, but the final decision hangs on next Friday's inflation print."

"Next Friday's CPI report will indeed be the key decider and the 0.4% month-on-month increase in headline prices and a 0.2% increase in core (ex food and energy) prices, which is what both we and the consensus predict, is probably not cool enough to prevent Warsh nudging the rest of the FOMC into a hike."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)