Markets now fully price a 26 bps Fed rate hike by year-end after robust NFP figures and downward unemployment revisions.
The US dollar rallied sharply after Friday’s nonfarm payrolls report showed stronger-than-expected job gains and upward revisions for prior months. The unemployment rate dropped to 4.29% from 4.33%, reinforcing expectations of tighter monetary policy.
Traders now fully anticipate a 26 bps Fed rate hike by December, with focus shifting to the upcoming dot plot and forward guidance. A hawkish shift in the Fed’s stance could further bolster the greenback, while softer CPI data tomorrow may ease tightening fears.
Meanwhile, the Bank of Japan is widely expected to raise rates to 1% next week, though the yen’s reaction remains secondary to US data and Fed signals.