Data from prediction market Polymarket shows the probability of the Federal Reserve raising interest rates by 25 basis points in September has dropped to 49%, a decline of 10 percentage points in 24 hours.
The decline came after the release of August ADP employment data, which showed the U.S. added just 38,000 private-sector jobs, the smallest gain since January and well below expectations. Market analysts noted the weak ADP report dampened expectations for a September rate hike.
Attention now turns to the August nonfarm payrolls report due on September 4, which will be the last comprehensive employment report before the Fed's September 15-16 policy meeting. According to analysts, a strong jobs report could boost rate hike bets, while an overly weak one might trigger recession trades. Only a "orderly cooling" scenario between the two extremes could provide a relatively favorable environment for risk assets.