By Joseph Adinolphi – Re-Blogged From http://www.MarketWatch.com
Report likely takes June rate hike off the table, analysts say
The euro traded above $1.13 on Friday for the first time in more than two weeks after official U.S. data showed the rate of jobs growth decelerated last month to its slowest level since late 2010.
Labor Department data showed the U.S. economy added just 38,000 jobs last month, the slowest pace of growth since September 2010. The number was far short of the 155,000 jobs economists polled by MarketWatch had expected.
Lee Ferridge, head of macro strategy at State Street Global Markets, said the May report helped cement a trend of slowing jobs growth. Readings from the past two months were revised lower by a net 59,000—bringing the three-month average to 116,000, its lowest level since June 2012.
“The thing with this payrolls report was it’s not as if this is an anomaly with other data firing on all cylinders. It’s not. The data in the U.S. has been generally lackluster,” Ferridge said.
Last month, Fed officials, including Chairwoman Janet Yellen, warned investors that rates could rise as soon as June, provided economic data remained robust. Minutes from the Fed’s April policy meeting showed a majority on the Fed’s rate-setting committee would support a hike in June, sparking a massive repricing of the likelihood of a summer rate hike in the federal-funds futures market, a popular market-based gauge of investors’ expectations for the pace of rising rates.
Now, a June hike is likely off the table, Ferridge said, while a hike in July is unlikely. The market is pricing in a 4% probability of a rate hike at the Fed’s June 14-15 meeting, down from about 21% on Thursday, according to the CME Group’s FedWatch tool. The chance of a rate hike in July is 36% from 49% yesterday.
“Unless you see a significant pickup in the June payrolls number, I don’t think I can see how they could go in July,” Ferridge said.