Overnight, after the non-farm payroll data came in far below expectations, interest rate cut expectations surged! The market's first reaction was a significant drop in U.S. Treasury yields, the dollar, and the VIX index, while stock, cryptocurrency, and gold prices soared.
However, things began to improve as traders realized that the employment data was not bad enough (excluding hurricane factors) to trigger a "growth panic," but also sufficient to provide Powell with enough justification to cut rates next week.
Expectations for rate cuts in 2024 (green line) and even 2025 (blue line) began to decline - returning to unchanged (with a projected cut of 108 basis points by the end of 2025).
