Yesterday, we learned new data on the US labor market. It shows that the economic situation overseas is deteriorating. So will the Fed start cutting interest rates? The cryptocurrency market has been waiting for this information.
Important data from the USA
First, the bare data: the number of jobs in non-agricultural sectors in June was 206,000 higher than a month earlier. This is more than analysts had assumed in their forecasts (190,000 jobs).
The above could be seen as a sign of the strength of the US economy. But that’s not the whole picture. The unemployment rate rose from 4% to 4.1% in a month. That’s the highest since November 2021. Here, the result surprised experts on the downside. Most economists had predicted that the percentage of people without work would remain at 4%.
If you shrug at these percentages, I’ll add that this means 6.811 million people actively looking for work. A jump of one decimal place is an increase of 162 thousand. And that’s on a monthly scale.
The cryptocurrency market has been waiting for such data
How to interpret such data? Experts agree: they indicate a weakening labor market. This means that the Fed now has a very serious dilemma.
Of course, the Federal Reserve can continue its policy and still not cut interest rates. However, the cooled labor market suggests otherwise. Further clinging to rates in the 5.25-5.5% range could lead the economy into a more serious recession. It is clear that the current policy of quantitative tightening has begun to stifle the circulation of money. This should knock inflation “down to the ground,” but at the same time it threatens a crisis.
The market has begun to assume that the Fed will make its first cut at its September meeting – to 5-5.25%. At the time of writing, the probability of this scenario is 72%.
While you probably feel sorry for the unemployed in the US, the above data on the labor market is a godsend for cryptocurrencies. If the Fed starts cutting, asset prices will start to rise. The dollar will weaken. Gold, silver, stocks and probably digital assets will shoot up.
Bitcoin is currently trading at $56,600, up 4% since yesterday. We are still down 7% for the week.
Ether has just broken through $3,000 again. It went up by about 5% in 24 hours. However, it fell by 11% in 7 days.
Sentiment is still bad. The fear and greed index is 26 and approaching extreme fear. However, this is another signal that BTC is already “cheap”.
The above text does not constitute investment advice.
