Although the news wires were largely dominated by the talk of US labor market fundamentals heading into the final two monetary policy decisions of 2016, the other major development on the horizon that was shaking financial markets was the talk of a UK “hard exit” from the European Union. Haven assets in particular were sold throughout the week as the US dollar rose on more hawkish commentary from key voting policymakers of the Federal Reserve. Fed Fund futures which give an indication of the probability of changes to policy are now pricing in a 60.00% probability of a rate hike during the month of December, up from just above 50.00% earlier in the week. The momentum higher in the dollar was evident throughout the week, with the US dollar index rising to the highest levels since July before retreating following the disappointing payroll figure of 156,000 jobs added. Aside from US fundamentals, the main attention was focused on the UK’s “Brexit” negotiations. With Europe looking increasingly punitive in its stance, trying to punish the UK for deciding to exit, the Pound continued to sell-off considering the rampant anxiety amongst investors about the outlook, briefly crashing over -6.00% on Friday before recovering.
Surprising Increase in US Unemployment
Weekly Report - 09/10/2016