If December was a “live possibility” for a rate hike prior to the October jobs report then today’s numbers may have just sealed the deal, after a staggering 271,000 jobs were added in the month and unemployment fell to 5%, the level that the Fed deems to be full employment. Ever since the October meeting, today’s jobs report was seen as one of two that could make or break the decision and based on the data, the decision suddenly looks pretty straight forward.
Today’s report was so strong that even a weak jobs report in November may not be enough to encourage the Fed to wait a little longer. Prior to the report, Fed Funds futures were pricing in a 58% chance of a rate hike, that has since risen to 70% offering the FOMC the perfect opportunity to raise rates with minimal disruption.
Source – CME Group FedWatch
If you ever needed a sign that the economy is recovering, today’s report was it. And to cap things off, average hourly earnings rose by 0.4% in October, far ahead of expectations of 0.2%. While we shouldn’t get too carried away with one number, this is very encouraging.
The dollar has surged after the release, with EURUSD falling to 1.07 and I would not be surprised to see further losses before the end of the day. With the ECB considering monetary stimulus – also in December – I see no reason why we can’t see parity here before the end of the year.
The report dealt another significant blow to Gold which has fallen below $1,100 for the first time since 11 August and this year’s lows could follow soon.