U.S. June employment data fell far short of expectations, quickly weakening prospects for a Federal Reserve (Fed) rate hike. Government Bonds yields and the dollar fell, while gold, silver, and Bitcoin strengthened.
The Labor Department said on the 2nd (local time) that nonfarm payrolls in June rose by 57,000 from the previous month. That is less than half the market forecast of 115,000 compiled by Dow Jones.
According to CNBC and other foreign media, immediately after the employment report, interest rate futures on the Chicago Mercantile Exchange (CME) FedWatch showed the probability of a rate hike at the Federal Open Market Committee (FOMC) on the 29th this month falling below 30%.
The probability of a September rate hike also fell in a day to 51% from 66%. In contrast, the probability of holding rates steady within the year rose to 23% from 17%.
Ian Lyngen, head of U.S. rate strategy at BMO Capital Markets, said, "Even if inflation rises somewhat, it is hard to expect a July rate hike."
Market rates also fell across the board. The U.S. 2-year Government Bonds yield, which is sensitive to monetary policy, dropped more than 2 basis points (1 bp = 0.01 percentage point) to 4.137%.
The dollar also weakened. The U.S. Dollar Index (DXY) fell 0.53% to 100.87, and immediately after the jobs report it slipped intraday to as low as 100.65.
With the Fed's rate hike odds lower and the dollar weakening, gold prices rose. Spot gold climbed 2.2% to $4,117.63 per ounce. Silver jumped as much as 3.8% intraday, topping $61. The World Gold Council (WGC) said Central Banks' net gold purchases in May were 41 tons, which also fueled the rise in gold.
Bitcoin also strengthened. As of 10 a.m. that day, Bitcoin was trading at $61,865, up about 6% from the previous day.
However, there is caution against forecasts that the Fed will immediately abandon its tightening stance. Chair Kevin Warsh recently said at a European Central Bank (ECB) forum that "inflation is still too high," reaffirming the commitment to the 2% inflation target.