May non-farm and expected 50bps rate hike by January.

Non-farm payroll report came and went with a bang, the first surprise was the better then expected employment report, expected to come in line with the prior months number around -540k thousand jobs shed. What we got was a mild roar out of the labor department posting only -345k jobs lost, this is by no stretch of the imagination a good number on the surface but it does show a bit of improvement from previous months, in fact it was the best number we have seen cense September 2008 further suggesting that the US recession may be nearing an end. The second surprising part of the jobs number comes from the employment rate spike jumping more then expected from the 8.9% to 9.4% putting it at the highest level since 1983. The dollar originally took a shot across the bow on the news but traders soon began to see the light at the end of the tunnel with expectations the FED may look to raise interest rates by years end; at this point I am factoring in a 50bps hike by January. With this expectation and my thoughts the FED may began to mop up liquidity quickly, traders began to rallied behind the greenback as they factored in the potential rate hike. The FED rate hike would be used to control liquidity in the markets, we can see this with the sudden surge in yields, traders are purchasing 10 year yields on the 10 year T-Bond spiking sending yields above 3.900% this is a direct sign that traders are concerned over inflation.