Market Reassesses Fed Policy Amid Unexpected Employment Data

According to PANews, the Federal Open Market Committee (FOMC) maintained interest rates between 5.25% and 5.50% during its July meeting, without providing guidance on future rate cuts. This decision has sparked concerns about prolonged high interest rates. Consequently, the 10-year U.S. Treasury yield rose to 4.24%, the dollar index climbed above 100, gold prices fell below $3,270, and Bitcoin experienced a short-term decline to the $116,000 range, with on-chain activity also decreasing. However, the July non-farm payroll report released three days later showed a significant drop, with only 73,000 jobs added, falling short of the expected 180,000. Additionally, employment data for May and June was revised down by approximately 90%. This "systematic overestimation" of the labor market led to a rapid reassessment of the Federal Reserve's policy path, with the CME FedWatch tool indicating a jump in the probability of a rate cut from 38% to 82%, and bets on two rate cuts within the year rising to 64%. The 10-year yield subsequently fell below 4.10%, gold rebounded by $40, and Bitcoin briefly recovered before dropping again to around $112,000. Despite the sharp fluctuations caused by the sudden cooling of employment data, structural indicators such as household debt levels, credit card default rates, and commercial loans suggest that the U.S. is currently experiencing a "slowdown" rather than a systemic recession. This combination of "employment decline and inflation relief" may signal an impending shift in monetary policy from tight to loose, with risk assets in a period of high volatility and liquidity competition.