Fed's Lockhart signals September rate Liftoff

When Lockhart comes out and says September could be an appropriate time to lift rates - markets pay attention. He is a voter on the central/dovish side of the Fed spectrum and he was pretty explicit in his comments: "I think there is a high bar right now to not acting". He notes that the addition of the word "some" (in the phrase "some further improvement" in the labour market) was "a qualifier that conveys to the public that we're getting closer"..."I don't think it would be a big policy error to wait somewhat longer... I'm not one to quibble over one meeting or so. But I do think we are close. The economy is in a state of readiness for beginning normalization". 

The reaction in FX markets pushed USD higher. EUR/USD tumbled 80pts to sub 1.09 (low 1.0883, spot 1.0890/95), USD/JPY popped up to 124.40 (spot 124.30). USD/CAD traded through 1.32 (high 1.3203, spot 1.3180).  

"Our house view looks for the first hike in September though attention will quickly shift to the pace of tightening once the Fed gets going. Right now the market is priced for a slow pace of tightening (Dec 16 Fed fund fut at 1.04%) - our rates strategists see upside risks," notes RBC Capital Markets.