Today, market attention is centred on the US jobs report, which unusually falls on a Thursday due to tomorrow’s holiday for Independence Day. The dollar’s precarious position makes this report influential in shaping upcoming economic sentiment. Meanwhile, pressure mounts on Powell for rate cuts, a scenario intensified by weak data.
The Federal Open Market Committee’s December meeting minutes will be out at 2 pm New York time, with Fed funds futures indicating about a 27% chance for a rate cut this month. Trade and tariff uncertainties continue to affect broader markets, making a sudden shift in the Fed’s stance unlikely. A 25 bps rate cut is fully expected for September, with further cuts in October, and a total of approximately 67 bps cuts anticipated by year-end.
Dollar Weakness And Jobs Data Impact
As the dollar remains weak, today’s jobs data could exacerbate its decline if not favourable. Besides economic projections, the Fed must also navigate trade issues and domestic legislative outcomes regarding Trump’s policy proposals. Even positive data today may not drastically alter the Fed’s strategy; September remains the anticipated date for initial policy adjustments unless the Fed signals otherwise. Therefore, a kneejerk reaction to positive jobs data may not shift long-term expectations.
With today’s schedule reshuffled by the holiday, market participants find themselves reacting earlier than usual to what is typically a Friday event—the non-farm payrolls data. The timing, however, does not take away from its weight. Given the weakness seen in recent US indicators and the anticipated tilt towards monetary policy easing, today’s figures sit at the heart of rate expectations and broader dollar moves.
The short-term pricing of interest rates suggests patience remains among futures traders, but the consensus still leans towards broad-based easing by year-end. We’ve observed a sustained pricing in of nearly three cuts for 2024, with the first firmly fixed on September. That leaves little room for a complete pivot if today’s numbers come in better than forecast. Markets don’t seem ready to abandon the easing story overnight.
Powell, under increasing scrutiny both politically and economically, is being watched for any deviation from the current path. His messaging has stayed close to cautious monitoring, prioritising data over speculation. That’s especially key given the internal divisions within the Fed itself—some members preferring to wait for clearer disinflation, others growing wary of stalling growth. We interpret this division as limiting the central bank’s ability to react swiftly unless there’s a major deviation in near-term data. That makes today’s report binary—and delicate.
Market Reactions And Future Predictions
For those of us watching rates closely, any strength in the labour market is unlikely to cancel expectations for future easing unless paired with other supportive indicators, such as upward revisions to past data and an uptick in wage growth. If only headline jobs growth exceeds estimates, but hourly earnings and participation stay muted, markets may look through it entirely. The long-term trajectory in rates still accommodates downside.
Tariff and trade dynamics remain key variables. With multiple deadlines approaching on trade negotiations and a legislative calendar shaped by election cycles, fiscal uncertainty complicates the Fed’s reflexes. Every new policy suggestion emerging out of Washington now carries broader consequences on growth assumptions and inflation forecasts. Traders have little choice but to bake in that uncertainty when building rate curves.
From a practical point of view, while today’s release could trigger near-term spikes in volatility, especially across currency and front-end rate structures, the overarching view hasn’t meaningfully shifted in recent sessions. Futures reflect a path of gentle easing, not emergency action. That tells us there’s still some confidence in the underlying resilience of the US economy—even if it’s fraying around the edges.
We are prepared for immediate reactions in bond futures depending on how the data lands, but any aggressive moves will likely face resistance unless backed up by the Fed’s communications or follow-on data. Options markets suggest volatility premiums are already in place for today, so any overreaction may get reversed in the following sessions. Traders would likely need justification beyond a single print to reprice the policy curve meaningfully.
As things stand, unless Powell indicates a firmer commitment towards upcoming cuts, today’s report is more about confirming a bias than redefining it. The baseline remains: softening economic output, persistent global trade issues, and political uncertainty coming together to support a gradual loosening cycle. Any deviation from this established narrative will need to stretch across multiple data sets—not just one morning’s release.