US average hourly earnings rose 3.7% year on year in January. This was above the expected 3.6%.<\/p>\n
The gap between the actual and expected rate was 0.1 percentage points. The release shows wage growth running faster than forecast.<\/p>\n
This stronger-than-expected wage growth data suggests inflation may be more persistent than we anticipated. The market had been pricing in the possibility of rate cuts by mid-year, but this report forces a re-evaluation of the Federal Reserve’s timeline. We must now consider that the Fed will remain hawkish for longer to ensure inflation is controlled.<\/p>\n
The immediate reaction can be seen in interest rate futures, which have quickly adjusted to lower the probability of a rate cut by June 2026. Just last week, CME FedWatch data indicated a nearly 70% chance of a cut by that meeting, a figure that has now fallen below 40%. This sharp repricing implies that derivative strategies based on imminent easing are now at significant risk.<\/p>\n
For equity index traders, this points toward a more defensive posture in the coming weeks. The prospect of higher-for-longer interest rates typically puts pressure on stock valuations, particularly in the technology sector. We are seeing the VIX, a key measure of market volatility, already climb from a low of 14 to over 17, suggesting traders should consider buying protective puts on the S&P 500 or Nasdaq 100.<\/p>\n
This situation feels familiar when we look back at the market dynamics of 2025. During that year, several strong labor market reports similarly pushed back the timeline for the Fed’s pivot, leading to temporary but sharp sell-offs in equities. We should expect similar volatility now, as hopes for cheaper borrowing costs are once again delayed.<\/p>\n
In currency markets, a more aggressive Federal Reserve outlook strengthens the US dollar. The Dollar Index (DXY) is already showing strength, moving towards the 105 level as capital seeks higher relative yields in the US. Derivative traders should look at strategies that benefit from a stronger dollar against currencies whose central banks are closer to cutting rates.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" US average hourly earnings rose 3.7% in January, beating expectations by 0.1 percentage points, signalling stronger wage growth.<\/p>\n","protected":false},"author":62,"featured_media":16963,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41600","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41600","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41600"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41600\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16963"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41600"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41600"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41600"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}