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Markets are now almost certain the Fed will move with a 25-bp cut after another set of dismal labour market numbers. The August payrolls report came in at just 22k jobs, miles below expectations of 75k, and June was revised into negative territory. That drags the three-month average down to pandemic-era lows of around 29k. Before COVID, you’d have to go back to 2010 to find numbers this weak.
The details weren’t much better: only four of the 11 main categories posted any growth, and even then gains were marginal. Hiring continues to lean heavily on education, health, and leisure—while vacancies are collapsing and the quits rate now suggests wage growth cooling toward 3%. With inflation pressures easing from the jobs side, the Fed has very little reason to hold back.
The real question is no longer if rates are cut, but by how much. Traders are already entertaining the idea of a 50-bp move, though our base case is a steady drumbeat of 25-bp cuts at the September, October, and December meetings. Either way, the shift is clearly supportive for crypto. Lower rates mean more appetite for risk assets, and Bitcoin has been quick to reflect that dynamic.
Fund flows data adds an interesting wrinkle: we’ve seen $338m in inflows this week, but the pattern is choppy—money comes in one day, only to slip out the next. It speaks to an investor base that’s cautious but watching the macro closely. If the Fed confirms this dovish pivot as we firmly expect, it will likely give investors the conviction they’ve been lacking to build positions in digital assets more decisively.
