Michael Woolfolk
Michael Woolfolk
below continue data fed labor likely market raising rates remains services support view
February's data support the view that the U.S. labor market remains strong, particularly on the services side, with unemployment solidly below the 5% level. The Fed is likely to continue raising rates for the foreseeable future.
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Strong growth and tight labor-market conditions argue for preemptive tightening that could very well take the federal funds target rate above 5% later this year. This is viewed as a dollar positive.
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This morning's announcement by the Bank of Japan to end quantitative easing is being viewed as an indication that the Japanese economy is returning to health, but appears insufficient to prompt any consistent yen buying as of yet.
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Oil prices have risen so dramatically that the view now is that this could choke off U.S. growth and prevent any recovery in the stock market.
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Anecdotal evidence on the trading floor indicates things have been lighter than at any other point in the week. You are seeing some one-off flows that are making a greater impact in the market due to this lower level of liquidity and volume.
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Benign inflation has weakened the Canadian dollar a little bit.
auto loss market reflect rest saying surprise
(The survey) was a big surprise this morning, but some of the market is saying that Detroit, because of loss of auto jobs, does not reflect the rest of the nation.
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Given recent Fed warnings over high levels of capacity utilization and low levels of unemployment, today's report increases the probability that the Fed will raise rates above 5.0% later this year. Last Friday's release of March unemployment further buttresses this view.
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I don't think it is possible for Iran to take money out of both the United States and Europe. There are just not sufficiently deep or liquid markets to place these sums of money.
market tape
But the tape will not be as important to the market as new data.
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What we are concerned about is that going forward they may decide to remove petrodollars and redirect them elsewhere. If they do, it is negative for the bond market and ultimately for the U.S. dollar.
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This was undeniably a positive report. Today's report could very well tip off a strong, albeit short, week for U.S. economic data.
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This report is nothing short of remarkable. The formula for a strong dollar is strong growth, tight monetary policy and loose fiscal policy. The U.S. happens to have all three. Private investors are comfortable investing in a country like the U.S.
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The reason why an inverted yield curve need not foreshadow recession this time is that it is foreign investors and not domestic investors who are increasingly buyers of U.S. bonds.