Fed minutes to reveal that Dec rate cut is not 'in the bag'; Payrolls report to drive 'extreme' volatility
With the government shutdown now over, market participants will finally have some long-awaited official economic data releases to digest, most notably Thursday’s payrolls report for September. Under ordinary circumstances, the dated nature of the data would be greeted by a more muted market reaction, but such has been the absence of economic news of late that we expect volatility around the report to be extremely high.
Consensus is for a 50k job creation number, which while undoubtedly weak, would far from confirm a December rate cut from the Federal Reserve, particularly given recent hawkish rhetoric from FOMC officials.
The latest FOMC meeting minutes will also be released this evening.
We expect the minutes to confirm that a December move is far from in the bag, particularly given lingering fears over US inflation. Futures markets are currently assigning less than a 50/50 shot of a cut next month, but we contend that even a particularly weak NFP report tomorrow may not move the needle massively given the incomplete view on the state of the broader economy.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
