Fed bets decline after June jobs report misses forecasts

• June nonfarm payrolls came in at 57,000, well below expectations, while wage growth was 0.3% month-on-month and 3.5% year-on-year, roughly in line with forecasts
• Rate hike probability for July dropped to virtually zero following the report, with expectations for additional tightening later in the year falling materially
• Analysts emphasized the upcoming US CPI release will be critical in determining whether the shift toward a less hawkish Fed stance continues

Summary: Fed Rate Hike Bets Fall After Weak June Jobs Data

Key Findings:

The US added just 57,000 nonfarm payrolls in June, significantly missing expectations, with prior months revised lower. The unemployment rate declined to 4.2%, though this was driven by reduced labor force participation rather than strong hiring. Wage growth was 0.3% month-on-month and 3.5% year-on-year, aligning with forecasts.

Market Implications:

The weaker-than-expected jobs report triggered a major shift in Federal Reserve policy expectations. Market participants now see virtually no chance of a rate hike in July, with probabilities for additional hikes later in the year falling materially. Analysts characterized the data as "welcomed weakness" – soft enough to reduce Fed tightening expectations without signaling recession.

Expert Analysis:

Ipek Ozkardeskaya (Swissquote) noted the report encouraged markets to trim Fed rate hike expectations for the year, with softer oil prices and easing yields contributing to broader shifts in currencies and gold. Kathleen Brooks (XTB) observed "a positive tone to markets" following the repricing of rate expectations.

Forward Outlook:

Both analysts emphasized that the Fed's policy trajectory remains highly data-dependent. The upcoming US CPI release will be critical in determining whether the dovish shift continues. The labor market slowdown has already driven meaningful reassessment of monetary policy expectations, but future direction hinges on incoming macroeconomic data, particularly inflation figures.

The report, published July 3, 2026, indicates markets are positioning for a less hawkish Fed stance amid cooling labor market conditions.