Research Team at Societe Generale, suggests that despite last month’s slowdown in job creation, Friday’s employment report suggests that the market got a little ahead of itself by pricing out all Fed rate hikes for this year. Key Quotes “The current unemployment rate of 4.9% is in line with the FOMC’s assessment of the longer run natural rate. Moreover, the recent pickup in wage pressures, although modest, confirms that labor slack has largely been eroded. The resilience of core inflation trends reinforces this point. It is troubling that the erosion of slack has continued with very subdued GDP growth – 1.8% in 2016 – which suggests that potential growth is currently running well below 1.5%. This means that the FOMC may have to continue normalizing policy even as the economy continues to produce less-than-stellar GDP performance. External factors continue to represent a meaningful risk to our call for three rate hikes and the Fed has legitimate reasons to skip a hike in March if it chooses to do so. However, the US economy would have to experience a much bigger financial shock than it has to date in order to derail the momentum in the labor market and to justify keeping rates on hold for the remainder of the year.” For more information, read our latest forex news.