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U.S. Jobs Report Lowers Market Expectations for Fed Rate Cuts

EconomyJul 05, 2019 10:11AM ET
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Investing.com - The U.S. employment report for June gave a mostly positive reading, reducing market conviction that the Federal Reserve will need to cut interest rates by a full half-point when it meets at the end of the month.

Job creation of 224,000 posts was well above consensus while labor force participation also increased. The latter also helps explain the fact that the unemployment rate unexpectedly increased to 3.7%.

Viraj Patel, FX & global macro strategist at Arkera, called it a “Goldilocks jobs report”, saying that, by itself, it doesn’t warrant a 50 basis point cut at the Fed’s next meeting.

Joseph Brusuelas, chief economist at consultancy RSM US LLP, said he still expected a 25 basis-point cut in July but argued that a half-point cut was "now off the table”.

Markets also reacted by paring back bets on aggressive easing from the Fed. U.S. futures extended losses after the report, the U.S. dollar strengthened against major rivals, while the yield on the U.S. 10-year Treasury broke past 2%.

Fed funds futures continued to fully price in a quarter-point reduction (25 basis points) for July, but odds for a 50 basis-point cut receded to just 9% as of 9:17 AM ET (13:17 GMT) from more than 25% ahead of the release.

The implied probability for three quarter-point cuts this year also fell from 57% to just 44%.

“June CPI data will determine whether (the) Fed needs to pull the lever in July,” Patel added. “Reality is we would rule out (a) July cut if every meeting wasn't live.”

U.S. Jobs Report Lowers Market Expectations for Fed Rate Cuts
 

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Comments (10)
Bagger Vance
Bagger Vance Jul 06, 2019 2:32PM ET
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Opposites attract
Chris Sundo
Chris Sundo Jul 05, 2019 5:57PM ET
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Famous market gurus like Louis Navellier have said months ago that there won`t be an interest cut in July, and certainly, the Fed has held its position against the Trump bully who is interested in pushing the market up and down as he likes to satisfy his fragile ego. Nevertheless, the market has rallied based on the erroneous assumption that the Fed will cut rates, and now in the face of reality, all this bullishness is way overdone and WE ARE TECHNICALLY OVERBOUGHT. The last time we reached this bullishness was in 2013 Dec and then we had a nasty pullback into 2014 April. --- CAVEAT EMPTOR --- Watch out below.
Richard Broome
Richard Broome Jul 05, 2019 5:57PM ET
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Barking up the wrong tree. You got it all wrong. You'll be facing head winds.Pay Attention!Wake up!
Pwr Strk
Pwr Strk Jul 05, 2019 3:15PM ET
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"Job creation of 224,000 posts was well above consensus while labor force participation also increased. The latter also helps explain the fact that the unemployment rate unexpectedly increased to 3.7%." Can someone please explain that math please.
Andrew Hook
Andrew Hook Jul 05, 2019 3:15PM ET
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It is the way they counting unemployment who has no change since the 80's. If you take in consideration wages are not increasing we are far from full employment otherwise the lack of labour force should create tension on the market ( rarety make things more expensive). So basically more and more MC Donald job poorly paid and people need to have 2 or 3 jobs to survived.
Brady Murray
Brady Murray Jul 05, 2019 3:15PM ET
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negative. it is widely known in the financial world that we are at full employment.
Richard Broome
Richard Broome Jul 05, 2019 3:15PM ET
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Employers are starting to get picky.
Ja Proc
Ja Proc Jul 05, 2019 1:43PM ET
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Lies. Stay off of foxnews and use your brain once in a while, that may help. It's called research. The central bank raised interest rates on Dec. 19, 2018 for the ninth time since 2015.
Brady Murray
Brady Murray Jul 05, 2019 1:43PM ET
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yea people, watch real "news" like CNN or MSNBC
Bagger Vance
Bagger Vance Jul 05, 2019 1:43PM ET
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We like Ja thinking he is correct, makes us money. Although I dont approve of ANY MSM... FOX, CNN, NBCs etc are all propaganda and for entertainment purposes only. Ja is definitely going the wrong direction.
John Hamlett
John Hamlett Jul 05, 2019 11:08AM ET
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Hasn't made sense to me anyway.  If there are so many more people employed in this economy there is no reason to cut interest rates.  People working = people getting paid = people spending it back into the economy.  Seems a healthy environment for a rate increase actually.
Clarence Brown
Clarence Brown Jul 05, 2019 11:08AM ET
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Yeah I agree, the fed should actually raise rates, by 25 basis points every year until they get resistance.
Robert Predicts
Robert Predicts Jul 05, 2019 11:08AM ET
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I can agree, the only justification was the initial agressive hikes to begin with. It was to quick to fast. Remember under our last President we had zero percent interest rates for nearly 4 years. Talk about a gift.
Robert Predicts
Robert Predicts Jul 05, 2019 11:08AM ET
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Sorry 8 years not 4.
Ja Proc
Ja Proc Jul 05, 2019 11:08AM ET
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Robert all Lies. Stay off of foxnews and use your brain once in a while, that may help. It's called research. The central bank raised interest rates on Dec. 19, 2018 for the ninth time since 2015.
Brady Murray
Brady Murray Jul 05, 2019 11:08AM ET
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Interest rates aren't tied only to employment or wall street. They are used to control inflation and the overall "heat" of the economy
Ivan Couto Jr
Ivan Couto Jr Jul 05, 2019 10:00AM ET
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So, I believe this is a good reason for a new meltup, right? Does not matter the news, algos always trend up
Endra Kristiawan
Endra Kristiawan Jul 05, 2019 9:54AM ET
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1380-1430 range
Nabil Miri
Nabil Miri Jul 05, 2019 9:50AM ET
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LOL rate cut wasn't gonna happen anyways. Vice-chair of FED said so this past week.
bomz bomzov
bomz bomzov Jul 05, 2019 9:50AM ET
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hope for the best, get ready for the worst
Richard Broome
Richard Broome Jul 05, 2019 9:50AM ET
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They speak with forked tongue's.
Andrew carson
Andrew carson Jul 05, 2019 9:49AM ET
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Sounds like a lowered forecast... look at the clickable list in the article..
bomz bomzov
bomz bomzov Jul 05, 2019 9:45AM ET
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why gold and state bond fall?
bomz bomzov
bomz bomzov Jul 05, 2019 9:45AM ET
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Endra Kristiawan  why? sell to buy stock?
Francois Giguère
Francois Giguère Jul 05, 2019 9:45AM ET
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Think because of increase in us dollars and gold also priced a .5 % fed cut
 
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