Hassett, the newly appointed chair of the U.S. National Economic Council, has recently made public remarks saying that Trump and his team will fully respect any policy decisions made the next day by Federal Reserve Governor Christopher Waller. Echoing this, the latest U.S. data released for the week ending August 29 showed that ADP employment changes came in at 16,250, up noticeably from the prior value of 12,000. With the political establishment’s forward-looking commentary on Fed decision-making layered on top of slightly firmer employment data, market attention has once again been pulled back into the tug-of-war over the interest-rate policy path.
From a macro fundamentals perspective, the rebound in employment indicates that the U.S. labor market remains resilient and has not cooled as quickly as some dovish expectations had anticipated. By signaling in advance “respect for the central bank’s decision,” Hassett appears to be granting space for policy independence, but in substance it reflects the White House and the Fed striking a delicate balance between economic slowdown and sticky inflation. With employment not yet showing material deterioration, the market’s aggressive expectations for the Fed to turn much more dovish face the risk of being revised again.
This chain of developments has exerted a significant suppressing effect on traditional financial markets. Employment data stronger than the prior reading often lifts short-term Treasury yields and provides support for the U.S. dollar index, which in turn weighs on valuations as risk assets attempt to recover. If Waller’s subsequent remarks continue a hawkish— or even more cautious—tone, market expectations for rate cuts could be set back again, and the global liquidity backdrop is likely to remain somewhat tight in the near term. Non-yielding assets such as gold may also face bouts of volatility.
For the cryptocurrency market, the repeated swings in macro liquidity expectations undoubtedly increase the downside risks for major tokens such as $BTC . Against the backdrop of liquidity tailwinds failing to materialize for an extended period, in-market funds are more inclined to adopt a defensive posture, and inflows into spot ETFs may slow or even turn into net outflows. Investors should remain highly alert to the risks of liquidity withdrawal and heightened volatility once policy decisions are implemented, and should not chase short-term rallies blindly.
#Fed #ADP #LaborMarket
From a macro fundamentals perspective, the rebound in employment indicates that the U.S. labor market remains resilient and has not cooled as quickly as some dovish expectations had anticipated. By signaling in advance “respect for the central bank’s decision,” Hassett appears to be granting space for policy independence, but in substance it reflects the White House and the Fed striking a delicate balance between economic slowdown and sticky inflation. With employment not yet showing material deterioration, the market’s aggressive expectations for the Fed to turn much more dovish face the risk of being revised again.
This chain of developments has exerted a significant suppressing effect on traditional financial markets. Employment data stronger than the prior reading often lifts short-term Treasury yields and provides support for the U.S. dollar index, which in turn weighs on valuations as risk assets attempt to recover. If Waller’s subsequent remarks continue a hawkish— or even more cautious—tone, market expectations for rate cuts could be set back again, and the global liquidity backdrop is likely to remain somewhat tight in the near term. Non-yielding assets such as gold may also face bouts of volatility.
For the cryptocurrency market, the repeated swings in macro liquidity expectations undoubtedly increase the downside risks for major tokens such as $BTC . Against the backdrop of liquidity tailwinds failing to materialize for an extended period, in-market funds are more inclined to adopt a defensive posture, and inflows into spot ETFs may slow or even turn into net outflows. Investors should remain highly alert to the risks of liquidity withdrawal and heightened volatility once policy decisions are implemented, and should not chase short-term rallies blindly.
#Fed #ADP #LaborMarket