U.S. Non-Farm Payroll Data Weakens, Market Expects Lower Probability of Fed Rate Cuts

In July, U.S. non-farm payrolls decreased by 23,000, falling short of market expectations for an increase of 85,000, marking the third-largest monthly job decline since the pandemic began in 2020. The June non-farm payroll data was revised down by 37,000, indicating weakness in the labor market. Following the release of the employment data, market expectations for a Fed rate hike in September dropped from about 70% to 40%. Analysts point out that a lower probability of rate hikes typically benefits risk assets, but weakening economic growth and the labor market may heighten market risk aversion. Gold prices have surged past $4,400, reflecting increased demand for safe-haven assets. The Bitcoin market faces dual impacts: a shift towards looser Fed policy could enhance risk appetite, benefiting crypto assets; however, continued deterioration in the labor market may limit market upside potential. The market will be watching next month's non-farm data to see if it further confirms the trend of slowing employment. If job weakness persists, it could strengthen expectations for a Fed shift towards easing, while also intensifying recession fears.

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