Consensus is that the Federal Reserve (Fed) will initiate interest rate cuts this year, but the extent remains debated. While the market is overly optimistic, the Fed continues to be cautious. Fed members who met year-end targets are aiming for a 75 basis point (bp) reduction for the current year.
Critical economic data released an hour before the opening of U.S. stock markets included Unemployment, Non-Farm Payrolls (NFP), and Average Hourly Earnings. All three are significant indicators of labor market health and their impact on inflation. Higher than expected unemployment, lower NFP, and below-expected hourly earnings have favored cryptocurrencies.
The U.S. Unemployment Rate was reported at 3.7%, matching the previous figure and better than the 3.8% forecast. Non-Farm Employment came in at 216k, exceeding the 175K expectation and the previous 199K. Average Hourly Earnings rose by 4.1%, higher than the 3.9% forecast and the previous 4%.
While the unemployment rate was relatively good, employment and hourly earnings data were disappointing. Wages increased more than expected, complicating the Fed’s fight against inflation. The Fed is likely to use these figures to justify a slower pace of rate cuts compared to market expectations, potentially leading to market unease until the end-of-month meeting.
The market may experience anxiety over these macroeconomic figures until the next Fed meeting, as the central bank is expected to interpret the data with a hawkish stance, given its slower rate cut trajectory compared to market expectations.
