Talk about laughable.
The knee-jerk move lower in the dollar and yields reversed course in what, for humans anyway, was the blink of an eye.
Of course to the machines it’s a veritable lifetime, so I guess we can write off the initial move lower to the algos “who” probably interpreted things correctly because it’s hard to spin the “dismal” out of that data. Have a look at this:
As for the reality of the situation (because we can’t divine anything about reality from that for obvious reasons), we go to Bloomberg’s Mark Cudmore:
There’s no chance of a Fed hike in December. The higher unemployment rate despite a flat participation rate and poor earnings all round, combined with Thursday’s core PCE print just make it impossible for Yellen to justify hiking in 2017 — and that’s even ignoring all the turmoil around the debt ceiling and balance sheet reduction.
We concur – for now.
Jefferies figures “it’s going to take more than one data print to start a meaningful trend lower in the dollar.” We assume they mean meaningful “new” trend lower, because it’s been a one-way ticket since March.
“It definitely doesn’t help the dollar at all, but I’m not sure it’s going to be the death knell that sends us another leg down”, the bank’s Brad Bechtel continued.
As for Treasurys, despite the above common sense assessment from Cudmore, Treasury futures have given back their initial gains as traders apparently think this is still consistent with 30% odds of a hike by year-end.
Seaport isn’t sanguine. “The August jobs and earning figures were bad all around and that combined with hit to economy from Hurricane Harvey will keep the Federal Reserve from raising rates again in 2017,” the firm’s Tom di Galoma, says, before taking it one step further: “This may even give the Fed pause on planed balance sheet changes.”