By Dean Popplewell
Fed Chair Janet Yellen reported, said very little new, blamed ongoing slack in US employment, put the emphasis back on the data "dots" with one of her comments of +1% rates at the end 2015. It's not necessarily new information, but the market saw as somewhat meaningful the fact that she has explicitly stated a time. The Fed chair was initially viewed as "dovish" but the market then noted some small changes in language. The new message makes it clear that if NFP is maintained at +230k it could force their hand - hence, the timeline. At this pace, within nine-months US unemployment will be at +5.3-5.5%. The labor market strength will be the influencer and all this market requires is "rate divergence" for volatility.
If nothing else, yesterday's testimony caused the various asset classes to move - immediate reaction had equities on the back foot; bond yields backing up, higher yields supporting the dollar, and gold trading under pressure from "no" inflation. It's quite a mouthful to chew, but certainly brought some much needed pockets of volatility that the forex market so dearly misses.
UK labor red-hot
On Governor Carney's watch the UK has produced another set of strong labor results with the UK claimant count measure down -36k in June. That makes the unemployment rate for March to May at +6.5% for forward guide historians and the lowest in six-years. What supports a strong report is the fact that the majority of job growth is full-time, however, what's probably going to make Carney's job a tad easier, from a earlier rate hike perspective, is the slack in wage growth (UK is not the only G10 economy with the same problem, in fact it seems endemic amongst the developed economies despite all that money sloshing about). UK wage growth is up only +0.7%, y/y. The bulk of growth is coming from
