The trend is clear in that the US labor market has softened after a strong recovery in the post-Covid era. This is to be expected, but we are now approaching the stage where market players expected this to lead to a soft landing in the US economy from last year.

Instead, the U.S. economy has been quite resilient, and that’s an example of the labor market — even if things are loosening up there.

As the Fed looks to pause its rate-cutting cycle, this will be a key area to watch in the coming months. If labor market conditions hold up alongside the inflation data, it will confirm the Fed’s prospects of staying on the sidelines while Trump’s policies come to fruition.

But if the data worsens, then there will be cause for concern about pressure on the Fed to continue cutting interest rates to start the new year.

Given what is at stake, this will be the item on today’s trading agenda. Nothing else will matter as much.

For now, Fed funds futures are ruling out a 25 basis point rate cut later this month with a ~93% chance the Fed will keep rates unchanged. The first full interest rate cut is only in June with ~42 basis points of the total price for this year. Oscillations, if any, in prices will be what will dictate broader market sentiment before we reach the weekend.