Markets increasingly confident about 'one-off' 50bp cut from Fed amid positive jobs data

Matthew Ryan, CFA Ebury

Market participants are becoming increasingly confident that the Fed’s 50bp cut will prove to be a one-off.

On Monday, FOMC chair Powell said, ‘This is not a committee that feels like it is in a hurry to cut rates quickly’, as he talked up the strength of the US economy and highlighted growing confident on restoring price stability.

As mentioned, markets have not completely ruled out the possibility of another 50bp cut, but this now seems contingent on a further deterioration in data, particularly out of the labour market, relative to the Fed’s expectations.

This week will see a dump of data out of the US jobs market, culminating in Friday’s nonfarm payrolls report for September.

The news that we’ve received thus far has been encouraging, with yesterday’s job openings data from JOLTS unexpectedly jumping back above 8 million (8.04M), its highest level in three months. Today’s ADP employment change number is next up, with economists pencilling in a modest bounce relative to August levels.

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.

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