Bitcoin trades above $61,000, rebounding with equities after weak US jobs report

Markets•May 3, 2024, 12:04PM EDT
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Bitcoin trades above $61,000, rebounding with equities after weak US jobs report

Quick Take

  • Bitcoin was back above the $61,000 mark following a weaker-than-expected U.S. jobs report, which weakened the dollar and raised the likelihood of a rate cut in September.
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Bitcoin climbed back above the $61,000 mark, tracking major equity indices higher, as a weaker-than-expected U.S. jobs report contributes to a decline in dollar strength.

Friday's U.S. jobs report revealed that employers added 175,000 jobs last month, falling short of economists' expectations for a 243,000 increase. Additionally, wages rose by 3.9% in the 12 months through April, below the anticipated 4.0% gain following a 4.1% increase in March.

According to Charles Schwab UK Managing Director Richard Flynn, the weaker-than-expected U.S. jobs report could place pressure on the Federal Reserve to cut rates sooner this year. "In recent months, it has become clear that the Fed is happy to move slowly in the cutting part of the rate cycle, but unwanted and unexpected weakness in the economy, as we are seeing today, may cause a shift in this approach. A dive in the labor market may be what it takes to push the Fed from a stroll to a sprint," Flynn said in an email sent to The Block.

Possibility for September rate cut

Other analysts concurred with this view, suggesting that the weaker jobs data casts doubt on the sentiment that rates will remain higher for longer. ING Bank Chief International Economist James Knightley said in a Friday note that, "given the situation we are sticking with our September Federal Reserve interest rate cut call."

In response to the jobs data emerging from the U.S., interest rate traders have raised the likelihood of a rate cut in June to nearly 14%, up from 6% on Wednesday, and the chances of a rate cut in September have increased to over 48%.

Cutting rates can boost risk assets like bitcoin because it makes borrowing cheaper, encouraging investors to seek higher returns in riskier assets. Additionally, lower interest rates can weaken the value of fiat currencies, such as the U.S. dollar, driving investors towards alternative stores of value like risk assets.

Equity markets react to U.S. jobs data

Major equity indices reacted 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%.
 
According to Ryze Labs analysts, the latest jobs report data has painted a gloomy picture for first-quarter real GDP growth in the U.S. However, the Ryze Labs analysts interpreted Wednesday's Federal Open Market Committee (FOMC) meeting as taking on a more dovish tone, noting 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," Ryze Labs analysts said in an email sent to The Block.
 
The bitcoin price increased 4.2% in the past 24 hours and was trading at $61,669 at 11:56 a.m. ET, according to The Block’s Price Page.