Strong NFPs suggest December lift-off.
The significantly strong US nonfarm payroll report which came in at 271k has the market now pricing in a Fed rate hike in December.
However, while US labour markets are robust there has been little transmission into inflation.
Without clear pressure on the Fed’s favourite inflation gauge, the core PCE deflator, it’s unlikely they will launch in December.
Elsewhere, the Bank of England, Norges Bank and Bank of Thailand all delivered a dovish outlook in their policy meetings. Whatever happens in December, it’s clear that monetary policy divergence theme will entrench itself as a primary driver of asset pricing in 2016.
Finally, Swiss CPI printed in negative territory again, indicating that the overvalued CHF continues to have a damaging impact on the economy. Yet, with QE2 looming in Europe the SNB has limited options to defend the CHF from further appreciation and strong deflationary effects.