US: Boomer NFP in store? - ANZ

Analysts at ANZ note that the US ADP employment data beat expectations by a significant margin, with January revised higher as well which suggests that this Friday’s NFP could be north of 200k on Friday, egging on the Fed to hike.

Key Quotes

“The manufacturing sector continues to firm, with goods-producing jobs adding 106k, a record high (in data from 2002), on top of +55k last month. Service-producing jobs added 193k. With the non-manufacturing ISM also firm, the ADP surprise suggests NFP could be north of 200k on Friday, egging on the Fed to hike (now fully priced). Elsewhere the UK Budget was neutral to defensive in the run-up to Brexit, and the UK near-term growth outlook was revised up.”

“After a boomer ADP report, the market is now pricing a 100% chance of a March hike, with a total of 66bps of hikes priced by end 2017. Market attention will soon turn to the Fed’s intentions regarding its QE-bloated balance sheet. Halting reinvestments in Treasuries as they mature could have a much larger impact on US long end yields than tweaking the overnight rate. US long rates set the direction for Australian rates, so it matters.”