IQ Option – October’s solid jobs report provided more data for the Federal Reserve to move ahead with another interest rate hike in December.
The U.S. economy created 250,000 nonfarm payrolls last month, while the unemployment rate held near 50-year lows of 3.7%.
Furthermore, average hourly earnings, which the Fed has been monitoring for signs of upward pressure on inflation, jumped to 3.1%, breaking the 3% level that economists generally consider to be consistent with rising inflation.
Commenting on the data, Mohamed El-Erian, Allianz chief economic advisor, said it “confirms economic fundamentals that are still gaining momentum and continue to outpace most other advanced countries” and added that “it makes Fed policy discussions even more interesting”.
James Knightley, chief international economist at ING, said the report “will keep the Fed hiking with a December move looking highly likely”.
Fed fund futures currently price in an increase at the end-of-the-year meeting at a probability of around 78%, according to IQ Option’s Fed Rate Monitor Tool.
RSM chief economist Joseph Brusuelas said the data will reaffirm the growing hawkish outlook at the Fed.
“In my estimation this just about guarantees at December rate hike,” he said. “I expect four 25 basis point hikes in 2019 in contrast with the current Fed forecast of three.”
Market reaction seems to support these experts’ opinion with the dollar having turned positive against major rivals after the publication. At 9:32 AM ET (13:32 GMT), the U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, gained 0.08% at 96.35.
U.S. bond yields also pushed higher on the back of expectations for a more hawkish Fed. The yield on the 10-year Treasury was last up nearly 1% at 3.174%, hovering near session highs of 3.180%.