Despite a spectacular 287,000 gain in non-farm payrolls in June, Fed funds futures are still only pricing in a 50% chance of a US interest rate hike by the end of 2017. This dovish spin allowed the price of gold to rebound on Friday after an initial tumble. However, there is little evidence here of the sustained deterioration in labour market conditions that many had feared – or hoped – would keep the Fed on hold. While the markets are right to be reassured that the US economy is picking up again, this is hard to square with their confidence that the Fed will remain on hold for another 18 months or so.
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