To The Moon

Friday's U.S. August nonfarm payrolls report significantly exceeded market expectations, immediately shifting how traders are pricing the Federal Reserve's rate path heading into the September policy meeting.

According to CME FedWatch data, immediately after the release, the probability of the Fed holding its current 3.50%-3.75% target range steady in September briefly climbed to 49.4%. Meanwhile, the odds of a cumulative 25-basis-point hike by September—which would lift the target band to 3.75%-4.00%—fell to 50.6%, leaving the two scenarios nearly evenly split.

However, within roughly 15 minutes, market pricing rapidly tilted toward tightening. The latest figures show the probability of holding rates unchanged in September has dropped to 42.0%, while the odds of a cumulative 25-basis-point increase have risen to 58.0%—a swift 7.4-percentage-point swing in just a short window.

This shift indicates that the much stronger-than-expected jobs data has reinforced market convictions about U.S. economic resilience and labor market strength, while simultaneously reducing the scope for the Fed to maintain an accommodative stance in the near term. With employment risks temporarily taking a back seat, market attention will now pivot to upcoming inflation data. Should the CPI remain stubbornly elevated, expectations for a September rate hike could continue to build.