October Fed Rate Cut Odds Rise After Weak U.S. Labor Data, Bitcoin Surges

U.S. private payrolls unexpectedly fell in September, raising market bets that the Federal Reserve will cut rates in October. This has coincided with a rise in Bitcoin price. Economists had expected an increase of 50,000 following a revised gain of 54,000 in August.

Market Participants Expect Fed Rate Cuts After Weak Payroll Data

The ADP National Employment Report showed a decline of 32,000 jobs, the steepest drop since March 2023. The weak data shifted investor expectations sharply, including a positive effect on Bitcoin. On Polymarket, the probability of the Fed keeping rates unchanged fell to only six percent.

Traders now anticipate another cut, as the central bank tries to ease pressure on a slowing labor market. The Fed reduced its benchmark rate in September to a range of 4.00% to 4.25%.

The release came at a sensitive time. The U.S. government has entered a shutdown after Congress failed to pass funding. The government shutdown has suspended many official reports, leaving private data like ADP with more weight. Without the Labor Department’s jobs release, investors turned to ADP for signals about hiring conditions.

Notably, the CME Group FedWatch tool has also now priced in a 99% probability that the Federal Reserve will cut interest rates at the upcoming October 29th FOMC meeting, lowering the benchmark rate from 4.25% to 4.00%. Analysts suggest the move would inject fresh liquidity into the financial system. This creates a bullish backdrop for risk assets such as Bitcoin, equities, and gold.

The decline reinforced concerns that employers remain cautious despite strong growth earlier this year. Hence, Citi economists say the Fed will likely deliver 25bp rate cuts in October and December, as signaled in its dot plot.

ADP Job Losses Fuel October Rate Cut Expectations and Bitcoin Rally

The ADP report showed that a high number of employees from small and medium businesses lost their jobs. A big decline was experienced in industry sectors such as leisure, hospitality and professional services.

Only large companies as well as certain healthcare companies employed many workers. A re-examination of the data added to the downward factor. Expectations for October were shaped by the ADP surprise and compelled many to request another rate cut.

Chicago Fed President Austan Goolsbee recently warned against rate cuts. He argued that the labor market remains steady, but the ADP report challenges that view.

The change brought positive sentiments to crypto markets. Bitcoin price surged beyond $116,000, as it has done over the past week and month. The TradingView data indicated that there was a big move at the beginning of the day even as the futures trading volume increased.

Bitcoin derivatives activity rose on Coinglass, with futures volumes nearing $100 billion in a single day, up by over 18%. Expectations of easier policy have consistently supported digital assets during periods of economic uncertainty.

The weak dollar and lower interest rate regarding borrowed funds tend to draw funds inflow into other investment options. The next few weeks will determine if the Fed backs market bets regarding rate cuts.