The October employment data released in the US has brought interest rate expectations for the Fed's December meeting back to the forefront in the markets. According to data from the US Department of Labor, non-farm payrolls increased by 165 thousand in October. Economists' expectations were for an increase of 65 thousand.
The fact that the increase in employment exceeded estimates by 100 thousand people indicated that the labor market is performing stronger than expected. The unemployment rate also fell from 4.2 percent in September to 4.1 percent. Upward revisions for previous months also supported this picture.
PROBABILITY OF INTEREST RATE HIKE INCREASED
Following the data, market expectations that the Fed will raise the policy rate by 25 basis points in December have strengthened. It was stated that the probability of an interest rate hike, which was priced at 75 percent before the data, has risen to 80 percent.
The Fed had kept the policy rate unchanged in the 3.75-4.00 percent range at its meeting last week. The strong employment data caused interest rate hike expectations, which had weakened recently, to gain strength again.
The next agenda item for the markets will be the October consumer inflation data expected to be released in the US next week. The course of inflation will play a decisive role in expectations regarding the Fed's monetary policy.
An increase in the probability of an interest rate hike could put pressure on gold prices if the dollar strengthens and US bond yields rise. For this reason, investors will closely monitor both the messages regarding the Fed and the new inflation data.
News Source: 12punto
