Preparing for the inevitable…Late on a Friday

The US Fed’s case for lifting interest rates next month seems to have been cemented with last week’s strong employment numbers. Financial markets have assigned a 70% probability to lift-off next month, indicating that there is still some adjustment to be made if they indeed go ahead with such a move. But in the aftermath of last Friday’s payroll data, the dollar strengthened and commodity prices sold off. Commodity price weakness was further exacerbated but disappointing data out of China which reignited concern over global growth. The price of copper plunged to a 6 year low, oil prices dropped to their lowest levels since August and the Bloomberg Commodity Index fell to its weakest point since 1999. Some US Fed members spoke during the week and pointed towards the need to hike interest rates, but they also stressed that the pace of hikes will be gradual following lift-off and that policy tightening will be slow.

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