Focus today will be on markets digesting Friday’s strong payrolls out of the US in light of what this means for Fed tapering its quantitative easing (QE) programme. A first Fed hike is now priced by December 2014, which we think is somewhat early considering that the Fed has signalled it intends to move slowly. Indeed, given the limited liquidity in US markets late last week due to Thursday’s 4 Julyholiday we emphasise that there is a risk the Treasuries sell-off on payrolls may be corrected somewhat today and we could see US rates decline a little.
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Danske Bank