A recent obvious change: the market's expectation of a rate cut by the Federal Reserve in January is rapidly dissipating.

Numbers speak. The market expectation of a rate cut in January has fallen from 17.7% to 11.1%, a decline of nearly 40%. Data from two major authoritative forecasting tools both point to the same conclusion—there's little chance of a rate cut at the January 30-31 meeting. The predicted probabilities from both institutions have already dropped below 12%, which is enough to show how pessimistic the market is about the possibility of this rate cut.

The reason for this shift isn't complicated. Recent US employment data shows that the job market is recovering mildly but steadily, giving the Federal Reserve a reason to hold off on any immediate action. The market's expectations have adjusted accordingly: since employment isn't a problem, there's no rush in January, let's wait and see what the subsequent data shows.

The ultimate decision hinges on these two sets of data—the upcoming December non-farm payroll report (which is official and more authoritative than other forecasts) to be released this week, and next week's December CPI data. These two directly relate to inflation trends and employment conditions. The Fed's stance at the March meeting will ultimately depend on how these two data points unfold.

In other words, the market is now cooling down from the late last year’s frenzy of "an imminent rate cut" and starting to listen to the data. The future trend will entirely depend on whether these economic indicators continue to confirm the current expectations adjustment.