Market Bets On Hold: Fed's January Rate Cut Odds Hit Zero as Jobs Data Cools

Fresh labor market figures have upended rate cut expectations, with interest rate derivatives now pricing in virtually no probability of a Federal Reserve interest rate reduction in the coming month. The shift in positioning reflects how sensitive monetary policy calculations have become to employment trends.

The employment landscape has recently shown signs of weakening, and traders have immediately recalibrated their Fed rate cut forecasts accordingly. What was once considered a realistic scenario for the central bank’s January meeting has effectively disappeared from the pricing of futures contracts and swaps—a stark tell for how the market interprets incoming data.

Interest rate swap markets serve as real-time barometers for rate cut odds, and their current signals are unambiguous: the probability of a Fed rate cut happening in January has collapsed to zero percent. This dramatic repricing underscores how tightly linked unemployment dynamics are to the Federal Reserve’s policy trajectory.

The broader implications are significant. Rather than loosening monetary conditions early in the year, the central bank now appears likely to maintain its current stance, at least through January. This recalibration matters enormously for crypto markets, which have historically responded sharply to shifts in interest rate expectations and the overall risk-on/risk-off sentiment that such moves trigger.