• US jobless claims fell to 187,000, the lowest weekly reading since September 1969.
• CME FedWatch puts hike odds at 33.7%, up from 11.8% a week earlier.
• Rate hikes, if they come, could pressure Bitcoin and other risk assets.

US initial claims for state jobless benefits dropped by 22,000 to 187,000 for the week ending July 18, the lowest level since September 1969. The drop hardened bets that the Federal Reserve (Fed) could raise interest rates at next week’s meeting.

The CME FedWatch tool now puts the odds of a hike at 33.7%, up from 11.8% a week earlier. That reverses the rate cut hopes that lifted crypto earlier this month.

Strong Labor Data Boxes In the Fed

The 22,000 drop was the largest decline in three months. Economists surveyed by Reuters had expected claims to rise to 212,000.

Furthermore, the number of people collecting benefits for more than a week, a rough gauge of hiring, fell to 1.796 million in the week ending July 11, a six-week low.

The drop lands as the US-Iran war lifts oil prices and sharpens inflation concerns. Those pressures pushed traders to reprice the July 29 meeting. CME FedWatch showed the odds of a hike at 33.7% on July 23, up from 11.8% a week earlier. A hold sat at 66.3%.

Matthew Martin, senior US economist at Oxford Economics, said the low level of claims is hard to overlook.

“There may be some seasonal noise in the data, given summer months tend to be noisy, but the extremely low level of claims is hard to ignore, and the trend in continued claims remains encouraging,” he said.

Martin added that a few layoffs and stronger hiring should cap unemployment in the coming months. Thin labor supply could even drag the rate below its current 4.2%, he said.

However, economists cautioned that seasonal auto plant shutdowns impacted the figure. Claims could rebound toward the low 200,000s next week.

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What the US Jobless Claims Drop Means for Crypto

While initial jobless claims could rebound in the coming weeks, the latest drop to a multi-decade low reinforces the view that the US labor market remains resilient.

This could potentially reduce the Federal Reserve’s urgency to lower interest rates. Higher interest rates lift the appeal of cash and bonds. They also raise the opportunity cost of holding assets that yield nothing.

The mood reverses sharply from early July. Weak payrolls then revived rate cut bets and lifted Bitcoin (BTC) toward higher levels.

The Fed meets over two days next week. Traders still favor a hold at 66.3%, though the jump in hike odds reflects rising inflation concern.

A hawkish surprise would test whether crypto can hold recent ground. In contrast, a rebound in claims next week could quickly cool the talk of a hike.