A Fed hike priced in by 54%, odds shoot up in favour – ANZ

By FXStreet Analysts at ANZ explained that the Fed rhetoric about the complacency of market pricing has seen the odds of a June rate hike jump from less than 5% a fortnight ago to 32% at present, with a July hike 54% priced in.

Extra reading: June? A live meeting? Come again?

Key Quotes:

“Recent comments from FOMC members Dudley, Kaplan, Williams, Lockhart, George, and Lacker have reiterated June is very much a live meeting and overnight comments by St Louis Fed President Bullard and San Francisco President Williams were of a similar ilk.

Recent data certainly suggest the market has a good reason not to completely rule out a Fed hike over the next few months. US inflation readings have been trending up (albeit modestly), and the US labour market is strengthening, with 2016 jobs growth averaging a shade below 200k per month.

The US economy also looks to be rebounding solidly in Q2, although still-sluggish manufacturing sentiment suggests not all of the economy is firing. The key stumbling blocks for the Fed still look to be the global scene as well as how well financial markets deal with higher US rates.

The generally modest reaction to date in equity, credit, and FX …read more

Source:: FX Street