ICYMI – PIMCO now expect just 2 Federal Reserve rate cuts this year. Were previously at 3.

Friday’s jobs report from the US, nonfarm payrolls, was sizzling:

• Forexlive Americas FX news wrap: US dollar jumps on hot NFP and then gives it back

Bond giant Pacific Investment Management Company (PIMCO) has dialed back its forecast for Federal Open Market Committee (FOMC) rate cuts this year. The previous PIMCO projection was for 3, but they’ve dialled that back to 2 now as thier ‘base case’. A PIMCO rep spoke with Reuters after the NFP numbers on Friday:

• this means a little bit less out of the Fed
• the economy is proving for now that it can handle higher rates

Checking FedWatch you’ll see the pricing for a June rate cut is now bordering on a coin toss. I reckon the likelihood is closer to 10% than 50%. If you’ve been following along with my ‘no June rate cut for you!’ shouting this’ll come as no surprise.

FOMC members are piling on the later cut bandwagon:

• Fed’s Logan: It’s much too soon to think about cutting interest rates

• Fed’s Waller says may need to hold current rate for longer than expected, no rush to cut
• Waller’s remarks have pumped up the US dollar
  • (ps still is too)
• More Fed’s Waller: The economy has supported the cautious approach by the Federal Reserve

• Still more from Fed’s Waller: If unemployment goes up no reason to panic
• Fed’s Bostic say he now anticipates only one rate cut this year
• If economy continues to be healthy, why would we cut rates

And, I like this reasoning:

• Global economic recovery, blistering commodities rally … threatening to derail the Fed

FedWatch update:

This article was written by Eamonn Sheridan at www.forexlive.com.