2 Jul 2015
US NFP impact on FX, Fed rate hike and GDP forecast – BBH
FXStreet (Barcelona) - With US nonfarm payrolls for June disappointing the market expectations, the Brown Brothers Harriman Team stands with their call for a September rate hike and further shares the outlook for EUR/USD and US GDP forecasts.
Key Quotes
“We suspect that on balance, views of Fed policy will not change based on this report. Those, like ourselves, who see September as the likely window, will not be dissuaded by today's data. Those expecting December or later for lift off are also unlikely to change their minds. There was never really much likelihood of a rate hike in July.”
“The dollar was sold on the disappointment, but we suspect given the long holiday in the US and the weekend referendum in Greece, participants are unlikely to take large bets today. The euro ran out of steam near $1.1120. Support is seen near $1.1140. The dollar retreated against the yen as US Treasury yields slipped on the news.”
“We are reluctant to draw much in the way of implications for other economic data based on today's employment report. Auto sales for June were still strong, above the 17 mln annual pace. While this is a bit slower than May, it still points to healthy US consumption. The lack of improvement in hourly earnings is unlikely to signal a retreat by US consumers who have boosted their savings in recent months.”
“There probably is scope for economists to lower their GDP forecasts. The 3% growth anticipated by the median for the coming quarters is likely too high. We feel more comfortable in the 2.25%-2.50%.“
Key Quotes
“We suspect that on balance, views of Fed policy will not change based on this report. Those, like ourselves, who see September as the likely window, will not be dissuaded by today's data. Those expecting December or later for lift off are also unlikely to change their minds. There was never really much likelihood of a rate hike in July.”
“The dollar was sold on the disappointment, but we suspect given the long holiday in the US and the weekend referendum in Greece, participants are unlikely to take large bets today. The euro ran out of steam near $1.1120. Support is seen near $1.1140. The dollar retreated against the yen as US Treasury yields slipped on the news.”
“We are reluctant to draw much in the way of implications for other economic data based on today's employment report. Auto sales for June were still strong, above the 17 mln annual pace. While this is a bit slower than May, it still points to healthy US consumption. The lack of improvement in hourly earnings is unlikely to signal a retreat by US consumers who have boosted their savings in recent months.”
“There probably is scope for economists to lower their GDP forecasts. The 3% growth anticipated by the median for the coming quarters is likely too high. We feel more comfortable in the 2.25%-2.50%.“