Weak US Employment Data Undermines Fed Rate Hike Expectations, Reviving Market Risk Appetite

Unexpected drops in US employment figures have reignited risk appetite, eroding expectations of further Fed rate hikes.

The Fed's Rate Outlook Crumbles

The market has lifted the probability of a Fed rate hike by year‑end to 71%, with the September odds now at 53%, while October and December stand at 71% and 83% respectively. A slowdown in inflation is expected to push policy towards a more dovish stance.

Global Markets Embrace Risk and Commodities

Equities and risk assets rallied on the softer US job data, while fixed‑income instruments posted modest gains. The 10‑year US Treasury yield sits at 4.66%, and the Dollar Index rose 0.2% to 99.7. Gold slipped 0.1% to $4,336 per ounce, whereas Brent crude climbed 0.4% to $83.9 a barrel.

Regional Data Steering Market Dynamics

In Europe, investors focus on Germany’s inflation, the UK’s growth and industrial production, and the Eurozone’s PMI. China’s inflation at 0.5% below expectations signals renewed deflationary pressure, shaping regional risk profiles.

Geopolitical Shadows and Energy Prices

Ongoing tensions in the Middle East keep traffic in the Strait of Hormuz below pre‑conflict levels, sustaining concerns over oil supply. While US military actions against Iran remain in the background, the lack of a diplomatic breakthrough continues to support price resilience.

■Non‑farm payrolls fell by 23,000 jobs, against a forecast of +85,000.

■Private‑sector employment rose 44,000 jobs, missing expectations.

■US 10‑year Treasury yield stands at 4.66%.

■Dollar Index at 99.7, up 0.2%.

■Gold at $4,336, down 0.1%.

■Brent crude at $83.9/barrel, up 0.4%.

Traders are leveraging the Fed’s policy ambiguity to steer short‑term liquidity flows. The modest rise in fixed‑income assets signals a tentative return of risk appetite, but geopolitical risks and regional data surprises could reignite volatility.