According to the latest news, the probability of a US interest rate cut in September has exceeded 70%, which is good news for the cryptocurrency market. At the same time, the US economy is weak and may fall into recession, so the market is very concerned about whether the Federal Reserve will take drastic interest rate cuts next.
 

According to the latest employment data released by the U.S. Bureau of Labor Statistics on July 5, the number of non-farm payrolls in the United States increased by 206,000 in June, slightly higher than the market expectation of 190,000, but far lower than the previous value of 272,000. The unemployment rate rose to 4.1% in June, lower than the forecast and the previous value of 4%, but still the highest level since November 2021, indicating that the growth momentum of the U.S. job market has slowed down, which has strengthened the confidence of the United States in dealing with the challenge of inflation.
 

Previous CPI, PCE and other data showed that inflation has slowed down. The non-farm data released last night further boosted the market's expectations that the Federal Reserve will start cutting interest rates in September. According to Fedwatch data, the probability of a rate cut in September has risen from 57.9% at the end of last month to the current 71.8%. Correspondingly, the probability of maintaining interest rates unchanged has dropped to 24.8%.

If the Fed eventually announces a rate cut in September or later, it will be good news for the cryptocurrency market. Historical data shows that the Fed's rate cuts usually drive up the prices of cryptocurrencies such as Bitcoin. Rate cuts can boost market sentiment for risky assets, and cryptocurrencies, as emerging assets, will be favored by funds. Loose monetary conditions will also create favorable conditions for the financing and development of cryptocurrency projects. In addition, rate cuts may lead to a weaker U.S. dollar, further boosting cryptocurrency prices, as cryptocurrencies tend to be negatively correlated with the U.S. dollar.

However, there is still uncertainty about the number and magnitude of the Fed's future rate cuts. Some analysts believe that the market may underestimate the magnitude of the rate cuts and expect the Fed to implement multiple large rate cuts to stimulate economic growth. Faced with economic downside risks, including poor employment and inflation data and a decline in the manufacturing PMI, the Fed may adopt a more active and accommodative monetary policy.
However, some analysts believe that despite the downward pressure on the US economy, the Fed may not cut interest rates significantly, but is more likely to adopt cautious policy fine-tuning, because excessive interest rate cuts may increase inflationary pressure and undermine the stability of the US financial system.
 

If the Fed takes a cautious approach to rate cuts, the rebound space of the cryptocurrency market may be limited to a certain extent. However, if the Fed implements multiple rate cuts in the future, the cryptocurrency market may usher in a stronger upward trend. On the other hand, if the Fed takes more aggressive rate cuts, it may lead to a depreciation of the US dollar, which will increase the value of cryptocurrencies relative to the US dollar.
 

Currently, although market expectations for the Federal Reserve to cut interest rates in September have increased, the risk of an economic recession in the United States is rising due to factors such as continued high inflation, weak demand caused by interest rate hikes, and geopolitical uncertainties.

In summary, although the US economy is facing downward pressure, the Fed's future interest rate cuts are still uncertain. If the cautious pace of interest rate cuts continues after the September rate cut, the rebound of the cryptocurrency market may be suppressed. We need to pay close attention to the Fed's policy trends and the actual performance of the US economy to judge the medium- and long-term trends of the cryptocurrency market.

 

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