08.09.25 - Rate cut speculation

Friday’s jobs report came in much weaker than expected, fueling speculation that the Fed could even deliver a 50 bps cut next week. Nonfarm payrolls rose by just 22,000 (vs. 75,000 expected), while the unemployment rate ticked up from 4.2% to 4.3%.

Markets: Sentiment flipped quickly from recession fears to rate-cut hopes.

• US equities rally today

• 10-year Treasury yield falls to 4.05%

• USD drops further

• Gold surges to fresh all-time highs

• Cryptos stabilized after recent losses

My View: Markets are now almost certain the Fed will ease policy at the upcoming meeting. Yet, several data points due in the next days could reopen the debate on whether such a move is truly warranted. Rate-cut speculation may continue to buoy equities, but this week’s inflation release will be crucial. A stronger-than-expected print could trigger sharp volatility.

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