Traders of U.S. short-term interest-rate futures on Friday began pricing in higher expectations that the Federal Reserve will raise rates in the next 12 months, after government data suggested the labor market outlook is brighter than thought.
Fed futures contracts show traders see a 24% of a rate hike by December and a 35% chance of a rate hike by next June. That compares to a 19% chance of a December rate hike seen before the report, and a previous view of a 27% chance of an increase in a year's time.
The U.S. Labor Department report showed that employers boosted payrolls last month by more than a quarter million, well over what had been expected, and more people, likely prompted by the promise of better job prospects, entered the workforce.
Jubilance over the report was tempered by the presumption that worries about the global impact of Britain's intent to withdraw from the European Union will keep the Fed in wait-and-see mode.
"I think the question today people will be asking is, does this put the Fed back on the table for July?" said John Canally, chief economic strategist for LPL Financial in Boston. "It's going to get that conversation started but it's probably a stretch for July given all the Brexit uncertainty."
Traders see no chance of a rate hike in July, according to CME FedWatch, which generates probabilities for Fed rate hikes at upcoming meetings from bets made in its fed funds futures market.