Soft Economic Reports Increase Odds of Federal Reserve Rate Cuts
This week, the U.S. government is set to release May employment data on Friday. Key economic indicators released on Wednesday showed unexpected weakness:
- ADP private payrolls added 37,000 jobs in May, below expectations of 115,000 and down from April's 60,000.
- ISM Services report registered at 49.9, below the expected 52 and April's 51.6, indicating contraction for the first time in a year.
- The Federal Reserve's Beige Book indicated slight declines in economic activity across half of the Districts, maintaining a pessimistic outlook.
The combined effect of this data caused the 10-year U.S. Treasury note yield to drop ten basis points to 4.36%, its lowest in a month. The probability of a July rate cut rose to 29% from 22%, with the chances of one or more cuts by September increasing to 76% from 58%.
Bitcoin has rallied nearly 50% since mid-April, reaching new highs despite ongoing Fed officials' comments against rate cuts. Currently, Bitcoin trades around $105,000, seemingly unfazed by potential future rate cuts.
The upcoming jobs report could further influence Fed decisions regarding rate cuts this summer. Economist forecasts predict an addition of 130,000 jobs in May, with the unemployment rate remaining at 4.2%.