Daily Commentary BY THE CURVE TEAM –

One Hurdle Left

7th of November, 2016

There is only one hurdle left that stands in the way of an FOMC hike in December.

The latest employment statistics in the US have left the FOMC with no where to hide when they meet to decide on monetary policy in December. While the headline jobs number was only lukewarm, with total jobs growth of 161,000 short of the 173,000, other measures were more supportive.

The small miss in the headline result for October was more than offset by the 35,000 revision to September’s original print of 156,000 while August’s result was revised up by 9,000. The big number however was in the form of wages growth. Average hourly earnings were up 0.4% for the month to an annual increase to 2.8%, the fastest pace since the GFC. This rise in wages is synonymous with a tightening labour force and supports the FOMC’s desire to lift rates.

The one hurdle standing in their way is the US Presidential Election. Any market tantrum following the outcome, or lack there off, when American’s head to the polls this week, could scuttle the FOMC’s plans. The outcome, which according to the poll, was hanging in the balance appears to be shifting back towards a Clinton victory.

The FBI have released a statement saying that the additional emails that were the basis for the re-opening of the investigation of Hillary Clinton have not changed their previous conclusion. The market as a result has already reacted and suggest they are now more confident of a Clinton victory which is expected to come with more stability in the outlook.

We now wait until Wednesday where the result of the election will unfold during the day our time. It should make for interesting viewing.

David Flanagan

Director - Interest Rate Markets