US average hourly earnings rose 3.5% year on year in March. This was below the expected 3.7%.<\/p>\n
The data point indicates slower wage growth than forecast. It compares the March result with consensus expectations for the same period.<\/p>\n
The lower-than-expected wage growth at 3.5% suggests the labor market is cooling faster than anticipated. This reduces pressure on the Federal Reserve to maintain its restrictive stance. We see this as a green light for risk assets as it lowers the odds of further rate hikes.<\/p>\n
Futures markets are already reacting, with the probability of a June 2026 rate cut now priced above 70%, up from just 50% last week according to CME Group data. This follows the February 2026 CPI data which showed core inflation stubbornly at 3.1%, making this jobs report pivotal. We should be looking at options on SOFR futures to position for yields to fall further.<\/p>\n
This clearer path toward monetary easing should suppress market volatility. The VIX index, currently sitting near 14, is likely to drift lower as rate uncertainty diminishes. This is a significant change from the elevated volatility we saw throughout much of 2025 when the timing of the Fed’s pivot was highly debated.<\/p>\n
Growth-oriented sectors, particularly technology, stand to benefit most from the prospect of lower borrowing costs. The Nasdaq 100 has historically outperformed when long-term bond yields fall, as we observed during the market pivot in the final quarter of 2023. We believe call options on technology-focused ETFs are now a more attractive trade for the coming quarter.<\/p>\n
A more dovish Fed outlook will likely put downward pressure on the US dollar. The Dollar Index (DXY) has already fallen 0.5% today to 103.50 on the news. We expect this trend to continue, making put options on the DXY or long positions in EUR\/USD favorable trades.<\/p>\n
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