Hourly Earnings Rise 0.6% Shaping US Financial Markets and Fed Rate Cuts

Summary

In recent time, wage growth has been seen in the economy with average hourly earnings increasing by 0.6% recently, improving from the 0.4% increase recorded last December. This has led to a surge in the U.S. stock futures and U.S. Treasury 10-year yields. Cryptocurrency also has had positive turn of events. However, the forecasts of the Fed rate cuts still remain. Notable economists and strategists have given their insights into these financial developments, its impact on the economy, and their predictions regarding future rate cuts.

A Shift in the Economic Scene

There has been an increment in the average hourly earnings by 0.6% in the last month, surpassing the 0.4% rise witnessed in the previous month (December). This shift has resulted in reactions in the market.

Market Reactions

The immediate reaction in the market was a paring of U.S. stock futures strong gains, which as of now, is up by 0.07% and still is indicative of a near flat opening on Wall Street. In addition, the U.S. Treasury 10-year yield jumped to 4.005% and the yields on two-year rose to 4.382%. In the Forex market, the dollar switched gears to a 0.73% positive.

Insights from Notable Financial Analysts

Kevin Gordon, Charles Schwab’s Senior Investment Strategist, underlined that any doubts about a March cut being considered have been discarded, contributing to greater clarity. Examining the market over nearly the past year, Kevin finds that the market’s interpretation of the near-term direction of Fed policy has often been incorrect, with this present situation being a good example.

With estimations of Fed rate cuts running rife, the robust job growth data are viewed as a solid sign for the overall economy by Robert Pavlik, Dakota Wealth’s Senior Portfolio Manager. The adjustments to this growth are unsurprising, however, the size of these revisions came as a surprise.

Lastly, Joseph LaVorgna, Chief U.S. Economist at SMBC Nikko Securities highlighted the strength in the numbers and pointed out the acceleration in underlying job trends – previously on a decline and now improving.

The Future Impact

Despite these current changes having an impact on the economy, the future would still witness a Fed rate cut, possibly in May. This event holds the potential to impact the Forex market and asset trading – the effect of the rate cuts may result in currency values and asset prices fluctuating.

PIP Penguin
Logo