July Fed Rate Cut Hopes Fade Following Strong US Job Data

Traders are exiting their bets on a July Fed rate cut following the release of the June US job data. The US unemployment rate dropped below expectations, while the country also added more jobs than analysts expected. This further strengthens the Fed’s case to wait and see the effects of the tariffs rather than rushing to cut rates.

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Traders Increase Bets Against A Fed Rate Cut In July

Polymarket data shows that there is a 94% chance that the Fed will keep interest rates unchanged following the July 30 FOMC meeting. Meanwhile, CME FedWatch data shows that traders have also exited their bets for a rate cut this July.

Source: PolymarketAs CoinGape reported earlier, the odds for a 25-basis-point (bps) Fed rate cut had increased to around 25% amid hopes that Jerome Powell and the FOMC would bow to pressure from Donald Trump. However, the odds have sharply dropped to 4.7% following the release of the US Job data.

Source: CME FedWatchUS Bureau of Labor data shows that the total nonfarm payroll employment increased by 147,000 in June, way above the expected 110,000. Meanwhile, the unemployment rate dropped to 4.1%, below expectations of 4,3%.

The market had been pricing in hopes of a July Fed rate cut based on these expectations since a declining labor market could motivate Powell and the FOMC to cut rates at the July 30 meeting.

Powell himself had left the door open to a July interest rate cut when he spoke at the ECB forum on Central Banking in Europe earlier this week. The Fed Chair remarked that he couldn’t say yet whether a July Fed rate cut will happen or not, and that it will depend on incoming data.

This US job data suggests that there is no need for the Fed to rush into cutting rates, as the labor market remains solid. Powell has hammered on this for a while, declaring that they are in a good position just to wait and assess the impact of the Trump tariffs.

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