There is ‘zero chance’ the Fed will hike in September: Trader

Suspicions that a September rate hike is coming have gained momentum, but one trader believes that such a raise is grounded more in speculation than in reality.

Friday's jobs report disappointed with only 151,000 new jobs created, way below the 180,000 initially forecast. But for many, the number was just good enough to raise the possibility of a Federal Reserve rate hike in September.

In fact, Goldman Sachs moved up its probability of a September rate hike to 55 percent last Friday off of Janet Yellen's speech at Jackson Hole and an interview with Fed vice chairman Stanley Fischer on CNBC's "Squawk Alley."

Cowen head of equity sales trading David Seaburg sees it differently. The trader opined on CNBC's "Power Lunch" that there is "zero chance" the Fed will raise rates this month.

"They want to make sure there's absolute clarity, that there's not going to be any shock to the market," he said Friday. "There needs to be at least close to 80 percent probability of a rate move in order for them to [raise]."

"Again, shocking the market is something the Fed doesn't want to do given all the work they've done to try to keep things balanced," Seaburg added.

The CME FedWatch Tool currently has the probability of a September rate hike sitting at 27 percent. To Seaburg's point, this means that unless the Fed manages to shift expectations, a hike would come as a substantial shock to the market, likely leading to major repositioning and volatility.

Others agree with Seaburg from a more purely economic perspective. Michael Block, chief strategist at Rhino Trading, wrote in a Tuesday morning missive that neither wages nor inflation appear to be accelerating, and "The FOMC can't raise rates when wages are pushing the economy to the brink of deflation."

Block goes on to write that he is shocked traders see the Fed raising rates in September or November, and noted, "I do intend to take advantage of hawkish misperceptions."

Boris Schlossberg, a currency trader and strategist at BK Asset Management, is on the other side of the trade. He believes that the Fed will hike in September, in order to get it out of the way before the November election.

"If they move in September, they take away the whole political argument because they look nonpolitical," said Schlossberg. "At the same time, they buy themselves a tremendous amount of time [so that] they do not have to move in December."

The much-awaited decision is set to be released on September 21.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more