Thursday, July 18, 2024

Bitcoin (BTC) bounced and Asian stocks fell Friday as investors awaited U.S. nonfarm payrolls data after Thursday’s ADP report showed better-than-expected private-sector hiring in the world’s largest economy.

The leading cryptocurrency by market value rose almost 1% to touch $30,300, reversing some of Thursday’s slide. The MSCI’s broadest index of Asia-Pacific shares, excluding Japan, extended the prior session’s weakness to drop to a five-week low, while U.S. stocks registered notable losses after a blowout ADP private-sector employment report for June raised concerns of higher interest rates.

In other markets, gold rose to $1,914 per ounce and the yield on the 10-year Treasury note stood at 4.02%, down 6 basis points from Thursday’s four-month high. The dollar index, which gauges the greenback’s exchange rate against major fiat currencies, consolidated on overnight losses near 103.00.

The Bureau of Labor Statistics will release the nonfarm payrolls report for June at 12:30 UTC. The U.S. is thought to have added 205,000 jobs last month, FactSet’s consensus estimates show, following an increase of 339,000 in May and 294,000 in April.

The unemployment rate probably dropped to 3.6% from 3.7%, while average hourly earnings are expected to have increased by 0.3%, matching May’s growth rate.

What’s priced in

Fed funds futures indicate traders see an 89% chance of the Federal Reserve (Fed) raising interest rates by 25 basis points to the 5.25%-5.5% range later this month. That’s slightly less than the 94% seen following Thursday’s ADP report and ISM services PMI data.

Traders are also pricing a 50% chance of another 25 basis point rate increase later this year.

“If I had to estimate what the market is really trying to place as a baseline, it’s a hike to 5.25-5.50% and then holding there for about ten months,” ForexLive’s currency analyst Adam Button said in a market update.

Impact on markets

With hawkish expectations already bolstered, a slight miss on the headline NFP and wage growth data could bring a positive mood back to risk assets, including cryptocurrencies.

The focus will also be on how the Treasury yield curve responds to the figure. If the curve begins to de-invert, risk assets may drop. Historically, curve de-inversions have marked arrival of economic recessions.

An inverted yield curve is the one where yields on longer duration bonds fall below yields on short duration bonds.

Edited by Sheldon Reback.

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