On Friday (July 4), at 20:30 Beijing time, the U.S. Bureau of Labor Statistics released the June non-farm payrolls report, which was stronger than expected and triggered sharp market fluctuations. Non-farm payrolls increased by 147,000 in June, far exceeding the market expectation of 110,000, and the previous value was revised up from 139,000 to 144,000. The unemployment rate unexpectedly fell to 4.1%, lower than the market expectation of 4.3% and the previous value of 4.2%. At the same time, the average hourly wage increased by 3.7% year-on-year, slightly lower than the expected 3.9%, indicating that wage pressure has eased. In addition, the number of initial unemployment claims in the week was 233,000, slightly lower than expected; the trade deficit narrowed to US$96.42 billion in May, but the market focus is still on non-farm data. This data shows that the resilience of the U.S. labor market remains, delaying the market's expectations of the Fed's interest rate cut. The U.S. dollar index and U.S. Treasury yields rose rapidly, and safe-haven assets such as gold were under downward pressure.

Immediate market reaction: Gold and stocks under pressure as the dollar strengthens

After the release of the non-farm data, the financial market reacted quickly. The US dollar index soared by about 55 points in a short period of time, breaking through the 97.00 mark, reaching a high of 97.3991, a four-day high, and a daily increase of 0.59%. The US bond market was also turbulent, with the 10-year Treasury yield rising 6.7 basis points to 4.359%, and the 2/10-year yield curve flattening, reflecting the market's adjustment of future economic expectations. Safe-haven assets were under pressure across the board, with spot gold diving by about $40, hitting a low of $3,311.53 per ounce, and the intraday decline widened to 1.32%. The main contract of COMEX gold futures was reported at $3,325.6 per ounce, a drop of 1.01%.




The foreign exchange market was also volatile. The euro hit a three-day low of 1.1729 against the U.S. dollar, down 0.57%; the pound fell to 1.3595 against the U.S. dollar, down 0.26%. The U.S. dollar broke through the 145.00 mark against the Japanese yen, reporting 145.132, up 1.04% on the day, showing that the U.S. dollar strengthened across the board under the boost of non-farm data.

Market sentiment quickly turned cautious. Retail investors were surprised by the data that exceeded expectations. Some traders pointed out that strong employment data may further delay the Fed's interest rate cuts and even trigger expectations of rate hikes. Another trader said, "The non-farm data is too strong. There is no chance of a rate cut in July, and it is also hanging in the balance in September. If the dollar is to take off, gold is expected to fall." The view of institutions is more sober. An analyst from a well-known institution pointed out: "The non-farm data in June showed that the labor market is still resilient. The 74,000 new jobs in the private sector were lower than expected, indicating that hiring has slowed but layoffs have remained low. The Fed may continue to wait and see, and the probability of a rate cut in September has dropped from 98% to 80%."

Expectations of interest rate cuts change suddenly: the Fed's policy path adds another variable

Before the release of the non-farm data, the market's bets on the Fed's July rate cut had fallen to 23%, and the probability of a September rate cut was as high as 98%. The strong employment data further dampened hopes for a short-term rate cut, and interest rate futures traders completely abandoned their bets on a July rate cut, and the probability of a September rate cut also fell to 80%. A financial blog pointed out: "The non-farm data exceeded expectations, and the Fed will not cut interest rates in July, and may not cut interest rates in September unless economic data deteriorates significantly." This view echoes the statement made by Fed Chairman Powell on Tuesday, who emphasized that he would closely observe the impact of tariff remarks on inflation and employment, and maintain a cautious stance of "waiting and learning more."

Compared with historical data, the increase of 147,000 non-agricultural jobs in June was stronger than expected, but it was slower than the average monthly increase of 186,000 in 2024. The data for April and May were revised up by 16,000 in total, showing that the labor market is still resilient, but the private sector added only 74,000 jobs, lower than the expected 105,000, reflecting that companies are more conservative in their willingness to recruit. The unemployment rate fell to 4.1%, the lowest point in recent months, but the labor participation rate fell to 62.3%, lower than the expected 62.5%, indicating that the labor supply is still limited. In addition, the annual increase of 3.7% in average hourly wages was lower than expected, easing inflationary pressures, but it was still higher than the Fed's 2% target, limiting the room for interest rate cuts.

The change in market sentiment is also affected by Trump's tariff rhetoric. Although the White House has postponed the threat of a 50% tariff on the European Union to July 9, market concerns about trade frictions have not subsided. Although Canada's trade data in May showed that the deficit narrowed to 5.9 billion Canadian dollars, exports to the United States fell for four consecutive months, highlighting the impact of tariff rhetoric on the North American economy. Retail investors are still discussing the impact of tariffs. One investor said: "Although the non-agricultural data is strong, the uncertainty of tariffs has made the market feel uneasy. Gold is under pressure in the short term, but the long-term safe-haven demand is still there."

Interpretation by institutions and retail investors: Cautious sentiment dominates

Interpretations by institutions and retail investors further reveal the divergence of market sentiment. Institutional analysts generally believe that although the non-farm data exceeded expectations, there are structural concerns. An analyst from a well-known institution pointed out: "The increase in employment in state governments and the healthcare sector is a bright spot, but manufacturing employment has continued to decline, down 7,000 in June, reflecting weakness in certain areas of the economy. The Federal Reserve may continue to stay on hold and observe the actual impact of tariffs on inflation." Another analyst added: "The drop in the unemployment rate to 4.1% seems positive, but the decline in the labor participation rate shows that the labor market has not fully recovered, and the Federal Reserve's interest rate cut still needs more data support."

The reaction of retail investors is more emotional. One trader commented: "Non-farm payrolls exceeded expectations, the dollar and U.S. bond yields soared, gold and the euro were directly hit, and short-term risk assets are going to be cold." Another retail investor is optimistic about the long-term trend: "Tariff rhetoric is weighing on the market, but employment data proves that the economic foundation is still there, and the S&P 500's new high is not for nothing. A correction is a buying opportunity." Compared with the optimistic expectations before the data was released, retail investors' expectations for interest rate cuts have obviously cooled down. Previously, many people bet on a rate cut in July or September, but now more people prefer only one rate cut before the end of the year.

Outlook for future trends: Caution and uncertainty coexist

Looking ahead, the market will seek a balance between the Fed's policy path and external uncertainties. The strong performance of the non-farm data in June provided short-term support for the US economy, but the slowdown in hiring and the decline in the labor force participation rate showed that the labor market is not impeccable. The Fed may continue to maintain the interest rate range of 4.25%-4.50% until there are clearer turning signals in inflation and employment data. Although the market's expectations for a rate cut in September have not completely disappeared, the probability has dropped to 80%, reflecting investors' reassessment of the Fed's "data-dependent" policy.

Tariff rhetoric remains a lingering shadow in the market. Although the White House has postponed some tariff measures, the trade negotiation deadlock with the EU and pressure on Canadian exports may continue to weigh on global economic sentiment. Gold, as a safe-haven asset, is under pressure in the short term, but in the long term, if inflationary pressure caused by tariffs rises, safe-haven demand may push up gold prices again. The US dollar index still has room to rise above 97.00, but we need to be wary of the risk of a correction caused by worsening economic data or escalating trade frictions. In terms of the stock market, the S&P 500 may face consolidation after its recent record high, and investors need to pay attention to the performance of subsequent economic data and corporate earnings reports.

Overall, the June non-farm payrolls report gave the market a shot in the arm, but it did not completely eliminate concerns about an economic slowdown. The Fed's cautious attitude, uncertainty about tariff rhetoric, and structural problems in the labor market will jointly shape the market's trend in the coming months. Investors need to remain highly vigilant and pay close attention to subsequent data and the Fed's latest statements to cope with the volatile market environment.