Odds Of A Rate Hike Rise To 64%, Bloomberg Says

The odds of a Federal Reserve interest rate hike occurring at some point this year have risen to 64 percent from around 50 percent last week, Bloomberg reported.

A boost within the market-implied probability of a rate hike this year comes at an uncertain time. Friday's monthly payroll report will serve as another crucial test; Treasuries are on pace for their worst performance since the middle of July. On the other hand, two-year Treasury yields, which are more sensitive to monetary policy changes recently hit a four-month high, and yields on the 10-year note are set to record a five-day advance.

Friday's job report is expected to show a pickup in job gains throughout September. Economists surveyed by Bloomberg are expecting the data to show the country added 172,000 jobs and the unemployment rate remained steady at 4.9 percent.

Related Link: Federal Reserve Being Held Hostage By Global Markets

In addition, the Bloomberg U.S. ECO surprise index, an index that measures how economic data read versus what analysts were expecting, surged this week and crawled out of negative territory for the first time since August.

The domestic data does support a rate hike, but the decision isn't as clear when factoring in international events, such as the ongoing decline in the British pound following the Brexit vote in June.

"The pound's drop certainly can't be ignored," Philip Wee, a senior currency economist at DBS Group Holdings told Bloomberg. "This sort of gives pause to everyone in terms of whether they should be single-minded on the U.S. story alone, or whether they should keep one eye on what's happening in Europe."

Not all experts Bloomberg spoke with share the same view.

John Gorman, head of non-yen rates trading for Asia and the Pacific region at Nomura, said that the Federal Reserve "needs to be a little bit more concerned about what's going on in the U.S. rather than externally, and the economy is improving."

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