US Treasury bonds strengthen, dollar weakens as Fed rate hike expectations plummet

US Treasury bonds strengthen, dollar weakens as Fed rate hike expectations plummet

Gold and silver prices surge over 2%... Bitcoin also rebounds 6%

Due to weak US employment in June, expectations for the Federal Reserve's (Fed) interest rate hike sharply declined, leading to a fall in Treasury yields and the dollar, while gold, silver, and cryptocurrency (Bitcoin) all surged.

On the 2nd (local time), the US Department of Labor announced that non-farm employment in June increased by 57,000 from the previous month. This is less than half of Wall Street's forecast (115,000, according to Dow Jones).

According to foreign media, including US economic broadcaster CNBC, the interest rate futures market, based on the CME FedWatch, reflected a less than 30% probability of a rate hike at the Federal Open Market Committee (FOMC) meeting on July 29, following the employment shock.

The probability of a September hike also plummeted from 66% to 51%. The probability of a freeze within the year rose from 17% the previous day to 23%.

Ian Lyngen, head of US rates strategy at investment bank BMO Capital Markets, said, "Even if there are upward price pressures ahead, it's hard to imagine a July Fed rate hike scenario."

The yield on the 2-year Treasury note, sensitive to short-term rates, fell by more than 2 basis points (1bp = 0.01 percentage point) to 4.137%.

The Dollar Index (DXY) fell 0.53% to 100.87, rebounding after plummeting to 100.65 immediately after the employment data release.

Gold prices surged due to dollar weakness and receding rate hike expectations.

Spot gold prices rose 2.2% to $4,117.63 per ounce, and silver prices jumped 3.8% during trading, breaking the $61 mark from a 7-month low. The World Gold Council (WGC)'s confirmation of central banks' net purchases (41 tons) in May also acted as a positive factor.

Bitcoin rose approximately 6% from the previous day to $61,865 as of 10 AM on the same day.

Meanwhile, Fed Chairman Kevin Warsh recently reaffirmed his commitment to achieving the 2% inflation target at a European Central Bank (ECB) forum, stating that "inflation is too high." This is interpreted to mean that the Fed will not completely abandon its hawkish stance despite the employment shock, leaving market caution intact.