US: Where to now? - ANZ

Research Team at ANZ, suggests that the latest NFP report had something for everyone, but it does confirm the ongoing improvement and absorption of slack in the labour market.

Key Quotes

“The probability of a hike from the Fed is only 8% priced for June and 50% by the end of the year. That seems too low for a “live” meeting, but it highlights the huge difficulty facing the Fed. Data releases apart, for a central bank that prides itself on nurturing market expectations, it has a mountain to climb to raise rates in June if it deems that appropriate. Should a central bank lead?

Academics could give you chapter on verse on that. But Yellen’s remarks back in March that the better tone to financial markets was a result of re-priced interest rate expectations helped to cede control to the markets and, without volatility picking up, it will be hard to take that control back. The market will be listening closely to the various Fed members due to speak this week (Evans, Kashkari, Dudley, Rosengren, George and Williams).”