The likelihood of a Federal Reserve (Fed) rate cut in September appears increasingly certain, with traders now estimating a 77% chance of such a move, up from 65.6% just a week ago, according to the CME FedWatch tool. This growing anticipation is driven by signs of a cooling U.S. labor market.
The U.S. Nonfarm Payrolls (NFP) report for June revealed a rise in the unemployment rate to 4.1%, the highest level in over two years. Additionally, Average Hourly Earnings saw an expected decline, alleviating concerns about persistent inflation as the slower wage growth is likely to curb consumer spending.
The heightened expectations for a Fed rate cut in September have constrained the appreciation of the U.S. Dollar (USD) and Treasury yields. The U.S. Dollar Index (DXY), which measures the dollar’s strength against six major currencies, is hovering near a three-week low around 104.85. Meanwhile, 10-year U.S. Treasury yields are struggling to maintain the weekly support level of 4.28%. Lower yields on interest-bearing assets diminish the opportunity cost of investing in non-yielding assets like silver.
