Word on the Street #334 Narrative reset?
Aug 7, 2025
Delve into the surprising findings of a weak US labor market report and its impact on interest rate expectations. Discover the challenges faced in today's labor market dynamics and how the Federal Reserve might respond. Explore the dollar's shifting value as a safe haven amid economic uncertainty. Additionally, hear about the Bank of England's recent interest rate cut and the varied opinions within its Monetary Policy Committee. With stalled disinflation in the UK, investors are urged to tread carefully in this complex landscape.
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Labor Market Reset From Revisions
- The US jobs report printed 75,000 and prior months were revised down by about 140,000.
- The three-month moving average fell to roughly 35,000, indicating a much weaker labour trend that concerns the Fed.
Front-End Bond Rally After Jobs Miss
- Weak payrolls and downward revisions sparked a sharp rally in US government bonds, concentrated at the front end.
- Investors repriced expected Fed easing, driving short-term yields materially lower.
Markets Price September Fed Cut
- Markets rapidly repriced policy after the weak payrolls and large revisions, pushing expectations for easing higher.
- The odds of a September cut rose to about 95%, prompting debate over whether an initial 50bp move could be priced.