Dovish Fed Repricing Extends On Labor Market Data, First Cut Now Showing Come End Of Sep FOMC

An unambiguously weak labor market report allows the post-FOMC dovish repricing in U.S. STIR markets to extend further, although we have edged away from post-data extremes.

• ~50bp of cuts are now priced through year end vs. ~42bp data, with pricing of the first full 25bp cut pulled forward to September vs. November pre-data.
• For reference, the strip got close to pricing less than 25bp of cumulative ’24 easing ahead of Wednesday’s FOMC.
• Furthermore, market implied odds of a cut come the end of the July FOMC sit around 50/50.
• A quick reminder that ahead of today’s data we suggested that the risk to market positioning seemed to lie within a weaker U.S. labor market report.
• We also warned that sensitivity to a soft NFP release could be further heightened by Fed Chair Powell’s choice to stress that an unexpected weakening in the labor market would widen the path to cutting rates.
• The ISM services survey provides the final U.S. data point of note ahead of the weekend.