What is the probability of a rate hike in December
The probability of a rate hike in December is close to 80% after the strong growth of the salaries of the month of August, non-farm payrolls report. Fed fund futures the implied odds have been climbing all week, after strong auto sales and a large non-manufacturing ISM report. It was crowned by a 2.9% climb in y/y wage increase of 2.6% in July.
This is a one-way ride in Fed rating since the beginning of September, when they fell as low as 21%. From a hawkish Fed and the hope of a tax reduction have changed the equation.
In the same period, the USD/JPY has climbed to 113.37 of 107.50. That includes a 50-pip rise from today’s jobs report.
In addition, for December, the chances of a second hike in March are also on the rise and are 37.5%, compared to 26.8% a week ago and only 5% at the beginning of September.