Fed's rate cut probabilities before non-farm payroll release in January and March

Summary

Ahead of the non-farm payroll data release, the probability of the Fed cutting rates by 25 basis points in January is 11.6%, with an 88.4% chance of no change. By March, the probability of a cumulative 25 basis point cut is 35.8%, with a 60.6% chance of no change, and a 3.7% chance of a 50 basis point cut.USHK News

Impact Analysis

So, the market’s on edge with the non-farm payroll data about to drop. The Fed’s rate cut probabilities are a bit all over the place—11.6% for a January cut, but a more interesting 35.8% chance by March. This tells us there’s a lot of uncertainty baked into the market right now. If the jobs data comes in weak, we might see those rate cut probabilities spike, which could lead to a rally in bonds and a potential hit to the dollar. But if the data is stronger than expected, it could reinforce the ‘no change’ stance and keep the dollar buoyant. For the portfolio, it might be worth looking at positioning in Treasuries or dollar hedges, depending on your view of the upcoming data. The market’s clearly not settled on a direction, so there’s room for some tactical plays here.