Australia's astonishing employment recovery

But first, the obligatory FOMC recap. Powell stuck to the script last night as expected.

Forecasts acknowledged the potential for strong economic growth and some inflation above 2%...

The dots are just for show, employment is the focus, and they will definitely signal well in advance when the time to taper is coming...  

There is still a lot of internal uncertainty over their projections (which these charts from TD Securities highlight):

The 'all important' median dot hasn't moved...

Nothing in the press conference to suggest that the moves in longer-term yields are unwarranted (or a concern).

Also, nothing to suggest that the move is done yet...

Wasn't the dollar going to crash by 20% this year?

Fascinating to see how EM currencies will respond to this...

  • Unanimous decision to hike from 2% to 2.75% (vs 2.50% expected)

  • Signalled another 75bps hike in May unless outlook improves significantly

With 12-month inflation running at 5.2%, well above the central bankā€™s year-end target of 3.75%, Copom said in its accompanying statement that this increase marks the start of a ā€œpartial normalizationā€ process for monetary policy.

A central bank survey of economists this week forecast the Selic ending this year at 4.50% and next year at 5.50%.

Most economists reckon the ā€œneutralā€ rate, when the economy runs at full employment and potential growth while keeping inflation constant, is around 6.0%-6.5%.

While we're on the subject, worth keeping an eye on Turkey's central bank decision today.

Erdogan announced a new fiscal plan to target inflation last week.

Inflation is running at nearly 16%, and the central bank policy rate is at 17%.

Markets expect another hike to 18 or 18.5%, although Erdogan believes high rates actually fuel inflation rather than combat it.

Can never rule out the Erdogan heavy hand interfering again...

Australia's Employment Recovery

The unemployment rate fell to 5.8% vs 6.3% expected...

88.7k full time jobs were added in February, well above the ~30k expectations

Excellent timing - the government jobkeeper scheme expires at the end of the month, and there are concerns about an employment 'fiscal cliff' causing a wave of layoffs...

Still a way to go, with underemployment increasing to 8.5% from 8.2%, and underutilisation high at 14.4% but no denying the positive progress...

Westpac noted the strong shift to full time this year:

So far this year there has been a distinct shift in employment towards full-time employment. Up to January the majority of the recovery in employment was part-time, since then we have seen a market shift with full-time employment lifting 147.8k (1.7%) since December while part-time employment is down -29k (-0.7%). Since March full-time employment is up 18.3k/0.2% while part-time employment is down -14.7k/-0.4%.

The fiscal cliff still looms and no doubt there will be further job losses in the coming months, but overall the early signs are positive...

Bank Of England Meeting

Really not expecting anything groundbreaking from the BOE today.

Policymakers are likely to reiterate their fairly relaxed attitude to the rise in gilt yields when they meet this week. However we may see some tentative pushback against the idea of multiple rate hikes over the next two-to-three years, as markets are beginning to factor in

The delay in vaccine supplies story that broke yesterday is understood to be due to a consignment from a manufacturer in India, with half of the order delayed by four weeks.

The government is still on track to hit its target to offer all adults a vaccine by the end of July, although the immediate pace of vaccinations will slow.

U.S. weekly jobless claims data today is expected to show a continuing recovery in the labour market, with continuing claims forecast to reduce further, and an outside possibility of the release falling below 4 million.

Inital jobless claims have remained above 700k over the past six months - a print below that figure would certainly be a welcome boost to the recovery narrative...