Wednesday March 30, 2016 - 18:04:49 GMT
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Traders: Fundamentals Do Matter. March Jobs Data Due Friday
According to the Fed Funds futures contract for December 2016, the odds on one 25bp rate hike for the rest of the year are now down to 68%. As of late Tuesday, after Fed Chair Yellen’s dovish policy speech in NYC, those odds had fallen to 80% from 96% early in the week. These odds are not set in stone. Nine months can be very long time in the financial markets. The odds are almost certain that perceptions will change numerous times between now and then.
It turns out that we will see a key piece of data (March employment statistics) this Friday, April 1 at 112:30 GMT which could have a big effect on market sentiment about policy and therefore the USD. Both the markets and the Federal Reserve will be looking at four items in this report on Friday: first the change in monthly employment, secondly, the change in average hourly earnings, thirdly, the unemployment rate, and finally, the U-6 statistic, which measures the number of labor market participants work working part-time who are seeking full-time jobs. Together these data will help paint a picture that will impact market sentiment about the likely future course of Fed policy.
As sentiment changes about future Fed policy, the value of the USD will adjust accordingly. Fed Funds futures are a handy yardstick of market sentiment about future Fed policy. The fundamentals matter, ignore them at your peril.
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