The implied odds of a 50 basis point hike in March rose to 34% from 18% after today's non-farm payrolls data. Note that the meeting is on March 16, so we will get another jobs report before then.
With the Bank of England's narrow vote to hike 25 bps rather than 50 bps yesterday, the bond market is running scared. US 10-year yields are up 9 bps today to 1.28%.
It's filtered through into the FX market, where the US dollar is surging across the board.
I'm skeptical of this data because of the benchmark revisions but I don't think anyone is arguing that the US labor market isn't tight. Jobs are plentiful and wage gains are real.
Does that mean the Fed needs to hike the panic button? I don't think they will but you can see which way the wind is blowing and it's tough for the Fed to lean against the narrative that inflation is a problem, especially with oil at $92.
For now, the trade is the trade and I don't see any reason to lean against it but I will note that what is happening is global, not US-specific. Jobs markets are tightening everywhere so central bank paths will diverge when it's clear what is transitory and what isn't. The US isn't going to be wildly diverging from Canada, for instance.
