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Is the Fed going to "copy homework" again to reduce the amount by 50 basis points? The market is actually betting on this!
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: The Federal Reserve wants to "copy homework" to reduce 50 basis points? The market is actually betting on this!". Hope it will be helpful to you! The original content is as follows:
On Tuesday (September 9), the U.S. Bureau of Labor Statistics (BLS) will release the preliminary benchmark correction of the annual non-agricultural data for the 2025 institutional survey at 22:00 Beijing time.
This preliminary correction will cover the 12-month cycle as of March 2025, and the final benchmark correction will be included in the employment report released in February 2026. The U.S. Bureau of Labor Statistics clearly stated: "The estimated data of the official agency survey will not be updated based on this preliminary benchmark correction; the final benchmark correction will be included in the official estimate data simultaneously when the Employment Situation Report for January 2026 is released in February 2026."
When the BLS released its annual preliminary benchmark correction in August 2024, it mentioned that in the 12 months ended March 2024, the actual number of new jobs in the US economy was 818,000 less than the initial report, which means that the actual value of employment growth during this period is 30% lower than the initial disclosure value.
In response, the Federal Reserve lowered the policy interest rate by 50 basis points on September 18, 2024, and then reduced the federal funds rate from 5.5% to 5%. The market reaction at that time was that the US dollar index fell rapidly by 0.78% due to the announcement of interest rates, but then Federal Reserve Chairman Powell hinted that policymakers are not in a hurry to cut interest rates significantly in the future, and that the US economic data is strong and inflation is controllable. The US dollar index then rose rapidly and recovered its lost ground.
Faced with the upcoming annual non-farm data correction, how will the US dollar index react, and on the 18th of this month, as the Federal Reserve announced its final decision on interest rates, whether the US dollar index will have the same situation, we need to make a trading plan based on the recent labor market situation and inflation data.
United StatesThe labor market is showing a cooling trend
The latest employment report shows that the number of non-agricultural employment increased by 22,000 in August. Prior to this, the number of non-farm employment increased by 79,000 in July (corrected from the initial 73,000), and this value was far lower than the market expectations of 75,000. BLS also pointed out that the number of non-farm employment in June has been revised down from 14,000 to 27,000, and after the correction it is -13,000 (that is, a decrease of 13,000). Among the employment data released in July, the growth rate of non-agricultural employment in May has been significantly revised down, from 144,000 to 19,000.
On August 22, Federal Reserve Chairman Jerome Powell admitted at the annual Jackson Hall Economic Seminar that the downside risks in the labor market are gradually heating up, and pointed out that tightened immigration policies have led to a "sudden slowdown" in labor supply growth.
According to data from CMEFedWatchTool, the probability of the Federal Reserve cutting interest rates by 25 basis points in each of the remaining three meetings this year and a cumulative interest rate cut of at least 75 basis points for the whole year has climbed from about 40% before the release of employment data to nearly 75%.
Currently, according to the results of interest rate futures trading, the United States expects a 100% chance of interest rate cut in September, and there is a 11.9% chance of a 50BP rate cut.
Is there room for a significant rate cut next week?
If preliminary benchmark corrections show that the U.S. labor market conditions are worse than expected, the market may see this as an opportunity for the Federal Reserve to take dovish measures at the upcoming policy meeting.
Steve England, head of global G10 foreign exchange research and North American macro strategy at Standard Chartered Bank, pointed out that the Fed may conduct a "compensated" 50 basis point rate cut at its September meeting, just as it did in the same period last year.
England explained: "The current market price of the Fed's interest rate cut in September is 28-29 basis points, and there is no clear change in the direction of 50 basis points. We admit that the current prediction is too early, but it is expected that the preliminary correction of employment data from April 2024 to March 2025 will support our proposed view of '50 basis points'." He added: "Taking the business life-dea adjustment method (birth-dea) The distortion effect brought by thadjustment and the more obvious downward trend of the employment population ratio, we still believe that the overall non-farm employment and unemployment rate data underestimate the degree of weakness of the labor market. "
The above content is about "[XM Foreign Exchange]: The Federal Reserve wants to "copy homework" and reduce 50 basis points? The market is actually betting on this!", which is carefully www.xmhouses.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your transactions! Thanks for the support!
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