A Bureau of Labor Statistics report released on Friday morning showed yet another month of hot employment data, prompting more discussion about what the Fed will do when it meets later this month.
Odds show a 67% chance that the Federal Reserve will keep current rates, with a 33% chance that the Fed decides to hike 25 basis points, according to the CME’s FedWatch tool.
Bitcoin (BTC), meanwhile, managed to retake $27,000 and has held on to the level throughout Friday trading.
On Wednesday, Daily Price Action’s Justin Bennett wrote that the selloff earlier in the week “means the $27,500-$27,650 area flips back to resistance. It also re-exposes the $26,500 support region.”
Right after the jobs report release, odds of no hike for the Fed were at 72% compared to a 27% chance of a 25 basis point hike.
Both Fed Governor Philip Jefferson and Philadelphia Fed President Patrick Harker voiced their support for no rate hike in June prior to the release of the jobs data, with Harker calling it a “skip.”
However, Harker noted that the jobs report “may change my mind.” The report was strong, though the unemployment rate ticked up.
The economy added 339,000 jobs last month, once again topping expectations of 195,000. Unemployment jumped to 3.7%, above the expected 3.5%.
“Markets may obsess over job statistics, but their role in determining the trajectory of inflation and interest rates is debatable,” Noelle Acheson wrote in her Substack, Crypto Is Macro Now.
so, US unemployment came in higher than expected to reach a 7-month high of 3.7% – but actual employment also came in *much* higher than expected, even though participation rate was more or less unchanged and this is all very confusing pic.twitter.com/Z0hVmTCTSu— Noelle Acheson (@NoelleInMadrid) June 2, 2023
But the report isn’t the only macroeconomic factor playing into the overall market mood going into the weekend.
The Senate passed a debt ceiling deal late Thursday, just barely ahead of the June 5 deadline suggested by Treasury Secretary Janet Yellen. Yellen warned legislators on Capitol Hill that the Treasury wouldn’t have enough money to pay off all of its bills if a deal wasn’t pushed through before June 5, meaning that a default was possible.
The package — negotiated by House Speaker Kevin McCarthy and President Joe Biden — suspends the debt ceiling into early 2025 and advances the Mountain Valley Pipeline as well as changes work requirements for federal food aid.
On top of the macroeconomic picture, the VIX — an index used to gauge overall market volatility — is at a 52-week low. The lower the VIX gets, the cheaper options prices become while options prices become more expensive when the VIX is higher.
The gauge of a so-called normal VIX — what traders look for in other words — is 21. At the time of publication, it had dropped to 14.
A $VIX under $14.10 takes up to pre Covid pic.twitter.com/Yj4G7iYEDA— Tom Hearden (@followtheh) June 2, 2023