Fed to not cut rates this October 31
In a note to clients on last week's NFP data CIBE argue that the Fed will be on hold on October 31:
"The US labor market appears to still be on a relatively healthy footing despite the downside miss on payrolls for September. The 136K job created was only marginally below the consensus forecast, and there was large upwards revision to the prior two months (+45k). Furthermore, aggregate hours worked on a three month average annualised basis were up 1% in Q£3 an acceleration from 0.5% in the prior quarter, and the large employment gain on the household survey sent the unemployment rate two ticks lower to 3.5%, while the participation rate remained unchanged. The main negative was the flat average hourly earnings figure, which left. The annual rate at its slowest pace in over a year at 2.9%. Overall, these data points are constructive enough to allow the Fed to skip in October on our view, and cut in December"
US CPI will be key this week in the Fed's thinking alongside the US/China trade talks too. There is a lot that could change this week, so a crunch week for the USD. The Current probability of a Fed rate cut after Powell's speech last night is now back up to 80% from a previous probability of 67%. 'To cut or not co cut' , that is the market's question and I think this is in the balance and incoming data will be key.
