FedWatch data update: The probability of a rate cut in January rises to 17.7%, as the market awaits confirmation of a policy turning point.

According to the latest CME FedWatch data, subtle but noteworthy adjustments have appeared in market pricing ahead of the Federal Reserve’s January meeting. The probability of interest rates being cut to 325-350 basis points has risen to 17.7%, while the likelihood of maintaining the current level of 350-375 basis points remains dominant at approximately 82.3%. Notably, no rate hike expectations are currently priced in.

What does this change in data reflect? Behind seemingly minor probability adjustments is a reassessment by traders of the Fed’s next policy move. Federal funds futures react extremely quickly to changes in macroeconomic data, market volatility, and risk appetite, so even marginal shifts in capital flows can cause significant changes in implied probabilities.

Market Sentiment from Futures Pricing

The midpoint price of the January contract ZQF6 stands at 96.3650, with trading activity and open interest remaining high. This indicates that the market remains highly sensitive to data—any signals that could reinforce “loose policy is brewing” or “maintaining the status quo longer” will be immediately reflected in pricing.

Historically, the Fed tends to be cautious at critical turning points in the economy. Policymakers usually require dual confirmation of sustained inflation decline and stable employment data before truly initiating a rate cut cycle. This explains why traders are beginning to price in mild rate cuts but are not fully betting on more aggressive easing scenarios.

The January meeting is being viewed by the market as a “watch point” rather than a “turning point.” Traders are maintaining flexibility—neither ruling out the possibility of rate cuts nor excluding the chance of holding steady.

Cautious Response in the Crypto Market

With the FedWatch probabilities updated, Bitcoin and Ether experienced modest gains during trading hours but did not see sharp upward jumps. This relatively restrained performance reflects traders’ rational attitude toward the probability adjustments—they see this as a gradual change in policy signals rather than a definitive directional confirmation.

Cryptocurrencies are known to be sensitive to interest rate expectations: lower policy rates ease financial conditions and support risk assets, including digital assets. However, as the market is still weighing the balance between cooling inflation and resilient labor markets, traders remain cautious about digital assets.

Historical experience shows that clear trends in cryptocurrencies often follow strong signals from futures markets rather than marginal probability changes. Before more macroeconomic data confirms a shift in Fed policy, digital assets may continue to track broader economic signals without forming sustained directional trends.