Back
31 Jul 2014
US wages growing in importance - Societe Generale
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale, underlines the significance of the US wages performance in tomorrow's release.
Key Quotes
"The 1y/1y rate spiked from 2.5% to above 4% in 2004 as the start of the Fed tightening cycle approached. The move we're seeing this summer is a little earlier than I had guessed (I have written frequently about watching for this to really start happening in September), but the market is doing what it typically does - pricing in the rate cycle aggressively once it becomes convinced that we are indeed months rather than years away from the first hike."
"There is further to go - the 1y/1y rate will surely overshoot, and I can easily imagine it reaching 2% by the end of the year. The 1-year in 5-years however, has been successfully anchored by the promotion of the notion that 'new normal neutral' rates are much lower now than in previous cycles."
"The market has not shifted from a view that the terminal Fed Funds rate is more likely to be 3% than, say, 4%. On yesterday's data, Q2 US nominal GDP growth is back above 4% y/y, and the idea of a rate peak far below that is only credible on the back of inflation data remaining very well behaved. So tomorrow's wage data will once again matter as much, possibly more than the unemployment rate or the gain in non-farm payrolls."
Key Quotes
"The 1y/1y rate spiked from 2.5% to above 4% in 2004 as the start of the Fed tightening cycle approached. The move we're seeing this summer is a little earlier than I had guessed (I have written frequently about watching for this to really start happening in September), but the market is doing what it typically does - pricing in the rate cycle aggressively once it becomes convinced that we are indeed months rather than years away from the first hike."
"There is further to go - the 1y/1y rate will surely overshoot, and I can easily imagine it reaching 2% by the end of the year. The 1-year in 5-years however, has been successfully anchored by the promotion of the notion that 'new normal neutral' rates are much lower now than in previous cycles."
"The market has not shifted from a view that the terminal Fed Funds rate is more likely to be 3% than, say, 4%. On yesterday's data, Q2 US nominal GDP growth is back above 4% y/y, and the idea of a rate peak far below that is only credible on the back of inflation data remaining very well behaved. So tomorrow's wage data will once again matter as much, possibly more than the unemployment rate or the gain in non-farm payrolls."