A Fed hike is more certain than ever now

US dollar jumps after strong non-farm payrolls report

The US dollar jumped 30-50 pips across the board after a strong non-farm payrolls report. The headline jobs growth was good but the Fed’s lingering concerns before hiking are more on the inflation front.

They got good news there as well with average hourly earnings rising 0.2% to meet the consensus estimate. That’s a second consecutive solid month after a +0.4% rise in October.

The Fed is doing to hike. I think it’s a done deal. The market would have to pull an epic fit between now and Fed day to throw Yellen off course.

But I think that was already priced in. Fedwatch tools still only put the ‘implied probability’ of a hike at 78% but that doesn’t tell the story.

The Fed will be operating in a 0.25%-0.50% range after the hike and I believe the market is pricing that rates will be pulled toward the lower part of the range into year end, and perhaps beyond.