The market's focus lately remains on next week's Federal Reserve meeting. The Fed is widely expected to cut interest rates for the first time in nine months, for a simple reason: the job market has clearly weakened. Investors are more interested in the outcome, not whether the rate will be cut, but rather how much it will be cut and what the outlook will be in the coming months.

Thursday's inflation data was slightly higher than expected, but given the recent string of weak employment data, the EFSANE analysis team believes this won't deter the Fed from taking action. Federal funds futures suggest a near 90% probability of a 25 basis point rate cut, while the probability of a 50 basis point cut is only about 10%. Historically, the Fed has mostly opted for a 25 basis point cut, with a 50 basis point cut typically reserved for recessions or just after them.

Market performance also reflects this: Anticipation of a rate cut, coupled with strong AI growth, strong corporate earnings, and easing concerns about the impact of Trump's tariffs, has driven US stocks to record highs, with the S&P 500 up 12% so far this year.

If the Fed actually cuts interest rates by 50 basis points in one go, it would suggest significant concerns about the short-term economic outlook. However, the greater probability is currently a 25 basis point cut. The market is also betting that the Fed may cut interest rates by nearly 75 basis points by December, equivalent to three regular rate cuts.

Finally, it will be important to pay attention to Powell's tone at next week's press conference. The Fed's dual mandate is price stability and full employment, but with such weak employment data, the market clearly prefers to hear them emphasize "supporting employment." If the Fed actually sends this signal, it will further boost market sentiment.