US Dollar: Hawkish Fed pricing supports Dollar into payrolls – BBH
Brown Brothers Harriman’s (BBH) Elias Haddad notes that Kevin Warsh’s hawkish Jackson Hole speech has sharply increased market-implied odds of a September Federal Reserve rate hike, supporting the Dollar and short-term Treasury yields.
BBH's Elias Haddad highlights Kevin Warsh's hawkish remarks from the Jackson Hole speech, which have significantly increased the odds of a September Federal Reserve rate hike. Currently, market-implied odds stand at 60%, up from 35% prior to Warsh's speech, and indicate 60 basis points of tightening over the next year. Fed funds futures price a 60% chance of a 25 basis point hike in September, with August ISM and jobs data expected to keep a September hike in play and strengthen the Dollar.
The August CPI on September 11 will be a crucial test before pricing remains elevated. The July JOLTS report and August ADP private payrolls data are also anticipated to reinforce the low job hiring and firing backdrop in the US labor market, supporting the Dollar.
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