FXStreet (Delhi) – Alan Ruskin, Macro strategist at Deutsche Bank, suggests that now that the Fed has successfully walked market expectations up above 50% for a December rate hike, the Fed is not going to want to walk expectations down again, after the payrolls data. Key Quotes “Not least it would smack of a Central Bank that is caught in the weeds and wiggles of short-term data. Central Banks must look like they are medium-term oriented.” “The Fed could not have wished for a better equity and global risk response to their ‘hawkish’ October FOMC statement. The markets have implicitly given their blessing to a rate hike.” “The bar’ to a rate hike is relatively low. Interestingly, the Bloomberg survey has only two forecasts out of 92 estimates below 145K. 97% of market payroll forecasts are in a zone consistent with a Dec tightening.” “Can the Fed enact a ‘dovish hike’ in December? The Fed hiking with payrolls averaging less than 150K would in current circumstances be regarded as a dovish hike, since it fits with the Fed being ahead of the curve and going slow. There is no such thing as a dovish hike if the data is strong.” “Strong data will prove at least a small negative for US equities, and, a more significant negative for Global Risk Appetite.” “In the FX market, on strong data short the MXN and ZAR in EM; and in G10 the CAD. A 200K type payroll number may be needed to give EUR/USD a kick through the major 1.0810 support level. A close below this level sets up an early run at the year’s EUR/USD low.” “The pain trade is a weak number that undermines prospects of a Fed rate hike, and squeezes freshly minted USD longs, including USD/JPY. Since weak data will at the margin raise the probability of future ECB depo cuts, this should constrain any EUR/USD uptick to near 1.10.” For more information, read our latest forex news.