Key Points
- Bitcoin’s value rose above $61,000, aligning with major equity indices, following a weaker U.S. jobs report.
- The disappointing jobs data could pressure the Federal Reserve to cut rates earlier, potentially boosting risk assets like Bitcoin.
Bitcoin’s (BTC) value surged beyond the $61,000 mark, mirroring the upward trend of major equity indices. This came as a result of a disappointing U.S. jobs report that led to a decrease in dollar strength.
US Jobs Report Falls Short of Expectations
The U.S. jobs report released on Friday showed that employers added 175,000 jobs last month. This was notably short of the predicted 243,000 increase. Furthermore, wages only rose by 3.9% in the year up to April, falling below the anticipated 4.0% gain after a 4.1% increase in March.
Richard Flynn, the Managing Director of Charles Schwab UK, expressed that the disappointing U.S. jobs report could push the Federal Reserve to cut rates sooner. He added that unexpected weakness in the economy might lead to a change in the Fed’s approach. Flynn suggested that a dip in the labor market may be what it takes to push the Federal Reserve to act more swiftly.
Potential Rate Cut in September
Other financial analysts agreed with Flynn’s perspective. They suggested that the weaker jobs data could cast doubt on the belief that rates will stay higher for longer. James Knightley, ING Bank Chief International Economist, stated in a Friday note that given the current situation, he is sticking with his prediction of a Federal Reserve interest rate cut in September.
In response to the U.S. jobs data, interest rate traders have increased the likelihood of a rate cut in June to nearly 14%, up from 6% on Wednesday. The chances of a rate cut in September have also risen to over 48%.
Rate cuts can boost risk assets like Bitcoin because they make borrowing cheaper. This encourages investors to seek higher returns in riskier assets. Additionally, lower interest rates can decrease the value of fiat currencies, such as the U.S. dollar, prompting investors to seek alternative stores of value like risk assets.
Equity Markets Respond to U.S. Jobs Data
Major equity indices responded to the news by posting daily gains. During mid-day trade in the U.S. on Friday, the Dow Jones was up by 1.14%, while the S&P 500 gained 1.11%, and the Nasdaq Composite rose by 1.92%.
Analysts from Ryze Labs stated that the latest jobs report data painted a gloomy picture for first-quarter real GDP growth in the U.S. However, they interpreted Wednesday’s Federal Open Market Committee (FOMC) meeting as adopting a more dovish tone. They noted how Fed Chair Jerome Powell announced a $35 billion per month taper to quantitative tightening and signaled that rate hikes are unlikely in the near future.
“With rate hikes off the table and markets already pricing in little to no cuts for 2024, we think that this bodes constructively for risk assets as the worst of stagflationary headwinds might be behind us,” the Ryze Labs analysts stated. The Bitcoin price saw a 4.2% increase in the past 24 hours and was trading at $61,669 at 11:56 a.m. ET.
