The solid Non-Farm Payrolls report completes the picture for the Fed move. Janet Yellen already prepared us for a removal of forward guidance in March during her battled testimony on Capitol Hill. She also repeated the mantra that everything is data dependent. This report is good enough to cement the removal of patience.
Without “patience” on rates, a hike in June is certainly on the cards, barring any kind of disaster.
The good report comes on the background of terrible weather. If this kind of growth is seen against these headwinds, the Fed may already be behind the curve on rates.
As we enter the spring, the economy could further improve. The impact of lower oil prices, even if they go up a bit, is a clear net positive for the American economy.
Also in the Fed’s measures, from the JOLTs report, the quits rates is on the rise. An example for the impact can be seen in Wal-Mart: they decided to offer wage hikes due to a high turnover of workers.
If we need another hint from the Fed, we received it just before the jobs report: John Williams sounded hawkish about rates. The San Francisco Fed President, which is considered close to Yellen, sounded upbeat comments on inflation, employment and rates just hours before the report. If a relatively dovish FOMC member is hawkish, we can certainly expect a hike in June, and not later.
The NFP report and the implications support the stronger dollar trend. We could see the greenback run towards the rate hike and for some time beyond that.
However, for the shorter term, we could see a temporary setback. Looking at the past, there is pattern of a bottoming out of EUR/USD around the NFP.
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