Tuesday, September 8, 2015

Fed: Markets pricing in 1-in-3 chances of lift-off in September - TDS

FXStreet (Delhi): Research Team at TD Securities, note that after the recent NFP data, markets are pricing in 1-in-3 chances of lift-off in forthcoming September meet which is likely to unsettle the markets.

Key Quotes

“Friday’s NFP-alooza was rather anti-climatic. Despite a disappointing headline number of 173k which fell short of consensus expectations for a 217k gain, this was entirely offset by a positive two-month revision of 44k, much of which was observed in the July month.”

“Additionally, wages were modestly better than expected and hours worked also nudged higher. All told, this was still a constructive report and is not enough to remove a September hike off the table, even though our base case view has been to push out the first hike until early next year.”

“The market is pricing a 1-in-3 chance that the Fed begins policy lift-off in two weeks and we do not see much in the way of data to alter that pricing dynamic until the next top tier data releases on the 15th and 16th (retail sales and CPI).”

“A hike would unsettle markets we think, but even if the Fed does not hike it risks sending a very cautious signal. Most will perceive the absence of a Fed hike as concern over global growth, and in particular China (and today’s trade balance report does not help).”
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