Fed's Caution and Strong Jobs Data Weigh on Market’s Rate Cut Bets

Market Overview

Recent U.S. data confirms a resilient labor market, reinforcing the Federal Reserves cautious stance. Chair Jerome Powell reiterated the need for “more data” before initiating rate cuts, causing markets to dial back expectations for a July rate cut. U.S. Treasury prices declined, pushing yields higher—10-year yields rose over 4 basis points, while 2-year yields gained about 6 basis points.

The dollar fluctuated, rebounding more than 0.6% intraday from its session lows before easing slightly by the close. In equities, investors rotated into cyclical sectors, lifting the Dow Jones Industrial Average by more than 400 points. The small-cap Russell 2000 outperformed, while the Nasdaq 100 dipped, dragged down by tech pullbacks. Gold extended its gains for a second day, rising over 1%, while crude oil continued to trade within a tight range.

Hot Topics to Watch

● JOLTS Job Openings Stronger Than Expected

According to Tuesdays report from the U.S. Bureau of Labor Statistics, the American labor market remains robust despite macroeconomic uncertainties. Job openings for May rose unexpectedly, hitting their highest level since November 2023—beating both prior data and market forecasts.

The ratio of job openings to unemployed workers—a key metric for Fed officials—climbed to 1.1, marking its first increase in several months. Layoffs declined, while hiring slowed and voluntary quits increased.

● Japan Faces Tariff Threats

Donald Trump stated he has no intention of extending the July 9 deadline for trade negotiations with U.S. partners and expressed doubts about reaching a deal with Japan. He threatened to impose tariffs of “30%, 35%, or whatever the number ends up being” on Japanese imports.

Bank of Japan Governor Kazuo Ueda, speaking at the ECBs annual forum, said the central bank is closely monitoring underlying inflation, potential impacts of U.S. tariff policy, and the anticipated slowdown in food inflation. Roughly one-third of BoJ watchers expect the next rate hike to come in January 2026, while another 30% expect it as early as October 2025.

Key Events to Watch

• 20:15 GMT+8 – U.S. ADP Employment Change (June)
• 22:30 GMT+8 – U.S. EIA Crude Oil Inventories (Week Ending June 27)