Market expectations for a Fed rate cut in September have significantly risen, with the probability jumping from 37.7% the previous day to 75.5%. This shift is attributed to the weak employment data released by the U.S. Department of Labor on August 1:
Non-farm payrolls added only 73,000 jobs in July, below expectations, and the unemployment rate edged up to 4.2%. More critically, the data for May and June was significantly revised down, with May's job addition lowered from 144,000 to just 19,000, and June's from 147,000 to 14,000.
The uncertainty of U.S. government tariff policies has intensified the wait-and-see sentiment among businesses, leading to a rapid deterioration of the labor market. Additionally, data from the Institute for Supply Management (ISM) shows that the manufacturing PMI for July was 48%, down from 49% in June, further confirming the weakening economic trend.
