Investors are heavily discounting the odds of the Federal Reserve raising interest rates in June following an unexpectedly weak US nonfarm payrolls report that missed forecasts by a considerable margin.

The Bureau of Labor Statistics reported that the US economy created just 38,000 new jobs in May compared to consensus forecasts for 162,000. Furthermore, April’s 160,000 reading was revised downwards by 37,000 to 123,000 new jobs; March’s 208,000 was trimmed to 186,000.

The official unemployment rate fell to 4.7% from 5.0% but this was attributed to the number of Americans leaving the work force, a fact reflected by a dip in the labor force participation rate to 62.6%.

“As far as we’re concerned, the prospect of a June rate hike is extremely remote," said David Giles, Head of Institutional Trading at Castle Holdings Ltd.

“Many commentators have held the long run of strong jobs reports up as a counter-argument to suggestions that the US economy is heading for a downturn but we’ve always maintained that unemployment data is almost always the last indicator to confirm the imminence of a downturn or a recession,” Giles explained.

In recent weeks, overtly hawkish statements from Fed officials combined with modest improvements in US new home sales and a jump in consumer prices have raised expectations that the US central bank will increase interest rates by 25 basis points in either June or July.

Castle Holdings Ltd says it has reduced odds on a June rate hike to zero while trimming the likelihood of a July increase to just 22% citing its belief that employment data will deteriorate further in the coming months.

About Castle Holdings Ltd:
Castle Holdings Ltd is a leading boutique Private Wealth Management company that is located within the vibrant and stimulating financial heart of Hong Kong since 2007, ideally poised to take full advantage of opportunities in an effective and timely manner within an optimised tax efficient environment no matter where in the world they may happen.