US Employment Numbers Too Strong for a Fed Hike

Fed Chair Janet Yellen avoided comments on a rate hike, giving now rampant dollar bulls momentary pause for thought, but the rest of the speakers had already made their points, and Wall Street duly endured another miserable day.

“I don’t favor waiting until I sort of see the whites in inflation’s eyes”, he said about monetary policy timing.

The economic calendar next week is highlighted by the minutes from the Federal Reserve’s October meeting as well as an array of economic data focusing notably on inflation and housing.

Last week, BI Governor Agus Martowardojo said the central bank maintains its focus on stability over growth in setting monetary policy, indicating the bank could pause for a longer time before reducing rates.

“The approaching week ought to shed slightly extra mild on the prospects for tightening this 12 months”. For the week, the index is down about 0.2 percent.

“The knee-jerk reaction in other terrorist attacks over the last decade has been a rush to safety, including aggressive buying in the U.S. Treasury markets”, said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia.

Cleveland Fed President Loretta Mester repeated her longstanding belief that the economy can handle an initial rate hike, arguing that such a move would not lead to such tighter financial conditions to hurt the medium-term economic outlook. Personal income, which reflects pretax earnings from salaries and investments, increased 0.1% in September. “Despite expectations for further price pressures, an expectation, mind you, that the Fed has held onto since 2011, inflation continues to retreat”.

“It seems increasingly likely the Fed will start a slow rate hike cycle in December”, says a note from Dutch bank ABN Amro, “resulting in a stronger US Dollar versus the Euro, Yen and precious metals”.

“The markets will take a few time to digest the certainty of higher rates”, he said. Crude futures, meanwhile, slumped to near six-and-a-half year lows in Friday’s session amid further signs of a glut of oversupply on global energy markets. “And it’s really good for banks and financials, because they will be able to make more on the interest margins”.

But picking winners and losers in the rising-rate cycle requires, first and foremost, a rising-rate cycle. “No one knows how much more exchange rates can weaken”.

Total retail sales for the month were $447.3 billion. The government’s budget year runs from October through September. Cable is broadly unchanged at $1.522.

“It would be a reason to maybe think about raising rates a little more quickly than I otherwise would, given the same unemployment and inflation rate”, he said, according to the FT. For instance, the value of bonds declines when interest rates rise. Australia’s S&P/ASX 200 declined 1.7 percent to 5,039.30.

It’s nearly unanimous: Economists believe the Federal Reserve will start raising short-term interest rates in December.

And it all might be for naught.

The question now is when the Fed will raise rates for a second time, and a third.

Silver for December delivery lost 0.035 or 0.25% to close at 14.190 an ounce.

But the bigger picture looks quite different when the 10-year Treasury is stacked against the comparable German bund, which is yielding 0.83%.