USD Soars on Jobs-Fuelled Fed Hike Odds

A powerful rally in the US dollar resulted from a broadly stronger than expected US jobs report (NFP +271K vs exp 185K, UnempRate fell to 5.0% from 5.1%, average hourly earnings rose to a 6-year high of 2.5% y/y). Job creation was robust across all industries as more workers entered the workplace even if the labour participation rate remained unchanged at 38-year low of 62.4%.

Click To Enlarge

Expectations for a December Fed hike surged to 72%, especially after Fed Chair Yellen hinted earlier this week the jobs bar for a December lift-off was not necessarily high. Today's jobs report broke well above Yellen's suggested bar to the extent that the rest of US data series will only have to avoid negative shocks for rates to rise next month.

The US dollar quickly surged to levels deemed worrisome by US corporations with as much as six weeks remaining into the December FOMC announcement. Will Fed speakers be too busy cementing the case for December lift-off to the extent of overlooking excessive advances in the US dollar? Next week's release of US retails sales and an expectedly hawkish round of Fed speeches over the next few weeks will surely prop US yields higher.

Assuming US data will maintain a neutral-positive showing into mid-December, Fed speakers will want to work on communicating a One-&-done rate hike for now. ECB dynamics and the euro are a whole different story.

The Premium Video Market Analysis, focusing on FX will be released this evening.