US Optimistic Jobs Report Could Mean Higher Rates Sooner

U.S. short-term interest-rate futures contracts fell after a U.S. government report showed U.S. employers added more jobs than expected in February, prompting some traders to price in an earlier date for a rate hike from the Federal Reserve.

The contracts show markets are now assigning a roughly 53 percent chance of a first Fed rate hike in June 2015, based on CME FedWatch, which tracks rate hike expectations using its Fed funds futures contracts.

Before the report, the earliest meeting seen as having a better-than-even chance of a rate hike was July 2015.

The Fed has targeted short-term rates of between zero and 0.25 percent since December 2008, and has promised to keep them there until well past the time the U.S. unemployment rate falls to 6.5 percent.

The unemployment rate rose in February to 6.7 percent, but job gains were 175,000, beating expectations.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza