Incoming labor market data from the US is increasingly convincing market participants that the Federal Reserve will be forced to start lowering interest rates to address the deteriorating situation in the domestic labor market and the economy as a whole.
One report after another—first the JOLTS job openings, then yesterday's ADP numbers, and today's expected data from the Department of Labor—all point to a significant slowdown in new job growth nationwide. Yes, Q2 GDP was much higher—3.3% versus the previous -0.5%. However, it is essential to note that this figure represents past events, not current or recent occurrences. It's very possible that the new Q3 numbers won't look so optimistic.
Yesterday's ADP data was not only in line with forecasts, but actually worse, which only reinforces the case for rate cuts. It was expected that in August, the US private sector would add 73,000 new jobs, but in fact, only 54,000 were created, entirely in line with the stream of data since the start of the year, where numbers above 100,000 were the exception.
Against the backdrop of the ADP print, federal funds futures surged to nearly 100% (99.3%) odds that the Fed will cut rates by 0.25%. However, as I see it, if today's official employment report from the Department of Labor also disappoints expectations, an interesting situation may arise: the central bank might not just cut by 0.25% but by a full 0.50%. In my view, considering pressure from Donald Trump and proposals from S. Bessent to reduce rates overall by 1.5%, such a scenario becomes increasingly likely.
According to the consensus forecast, the US economy added 75,000 new non-farm jobs last month, just a bit better than July's 73,000. Unemployment is also expected to increase from 4.2% to 4.3%.
How might the market react to these numbers?
I believe we can anticipate a clear increase in demand for stocks, a weakening USD, and a rise in cryptocurrency prices against the dollar. As for gold, we probably shouldn't expect a strong rally— the "yellow metal" has already made a significant move, hitting new highs, effectively pricing in US rate cuts.
Assessing the big picture, I view current market conditions as overall positive.
The cryptocurrency is getting support amid expectations of a weaker dollar driven by soft US labor market data. If the report comes in at or below forecasts, strong demand for tokens can be expected, with Bitcoin potentially surging to 116,895.00. The 112,760.00 level could serve as a buying point.
The CFD on the NASDAQ 100 futures contract is trading below strong resistance at 23,737.00. A breakout of this level on the back of weak US jobs data could push the contract up to 23,945.00 after breaching resistance. The buying level could be 23,757.00.
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