Labour market data and interest rates: Will crypto see a rebound?

It is a big day today, guys. We have the highly anticipated labour market data out at 1:30 PM UK time. As we have explained in recent updates, the market and the Fed are now in a new regime where the focus is on the labour market (and its potential deterioration) rather than inflation. 

Powell made this clear in his August Jackson Hole speech, guiding a new Interest rate cutting cycle starting in September. What we're looking for, and what risk assets are solely focused on, is whether this economy is moving into a 'soft' or 'hard' landing. 

That will depend on whether the labour market collapses (layoffs begin and the unemployment rate increases). Hence, there is such a strong focus on today's labour market data. The data out today is as follows: 

• Non-farm Payrolls: Prior 114k, Consensus 160k 
• Unemployment Rate: Prior 4.3%, Consensus 4.2% 

This week's data leading up to today's print has been mixed. 

We've had positive ISM Services, which is good, but we had a downside surprise in Job Openings. Yet, Initial Jobless Claims came in lower, showing that the number of people claiming unemployment benefits isn't increasing, i.e., the labour market is holding up. 

The expectation for today is that Non-farm Payrolls rebounds (the number of jobs added increases) and that the Unemployment Rate moves down slightly to 4.2% from 4.3%. 

If we were to get the above, the market would likely take this positively, as it would shake off the weakness we saw in last month's prior labour market data print. 

However, if the data comes in below 100k jobs added and north of a 4.3% Unemployment Rate, the market might not take this too well. We're also looking at Average Weekly Hours closely today. 

Ideally, you want to see this hold up. A meaningful decrease in Average Weekly Hours would suggest Employers are not using workers for as many hours, which can precede layoffs. Personally (Tom), I am expecting the data today to come in around the consensus. 

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.

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Our initial thoughts

Today's tough to call. But if the data comes in positively (and we think it can do so/come in at consensus), then the market can have a small bounce today. However, we are expecting the markets to remain tricky and potentially grind lower in September. 

We would use weakness as an opportunity to buy, though, as we're still very positive about year-end and early 2025. 

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Actual data is out

Labour market data OUT! 

• Non-farm Payrolls: Prior 114k, Consensus 160k, Actual 
• 142k Unemployment Rate: Prior 4.3%, Consensus 4.3%, Actual 
• 4.2% Average Weekly Hours: Prior 34.2, Consensus 34.3, Actual 34.3 

This is a mixed print, with unemployment back to 4.2% (positive), but non-farms are still somewhat weak (negative). To be honest, we are not convinced that the market can get a meaningful bounce here. After the Fed-speak, we will do a follow-up Market Update on its way this afternoon.

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Closing comments 

Today's labour market data came out as follows: 

• Non-farm Payrolls: Prior 114k, Consensus 160k, Actual 142k
•  Unemployment Rate: Prior 4.3%, Consensus 4.3%, Actual 4.2% 
• Average Weekly Hours: Prior 34.2, Consensus 34.3, Actual 34.3 

Overall, we've had a positive decrease in the unemployment rate, and we've seen jobs added at 142k, which is also positive. But, for the prior months, jobs added were substantially revised lower. 

However, the US is still adding around 100k jobs each month, which is historically very decent. Following today's data, we've had several Fed members speak. The most notable of these is Fed Member Waller, who made a few notable comments:

• "I will be an advocate for front-loading interest rate cuts".

• "I would cut at the consecutive meetings if data calls for it, as I would be for larger cuts if needed".

• "I do not believe the economy is in a recession nor necessarily headed for one soon".

The balance has clearly shifted now, and Fed members are focused on the labour market and potentially even getting out in front of the slowdown/moderation with more than 25bps Interest Rate cuts. 

In August, Powell at Jackson Hole said, "Further cooling in the labour market wouldn't be welcomed". This potentially sets the Fed up to do 50bps of Interest Rate cuts at either the September or November meeting. 

Personally (Tom), to me, it doesn't make sense to do 25bps in Sept and then do 50bps in Nov, which would be post-election. If the Fed went down this path, the market would be unsure if 50bps cuts would continue into December. 

The Fed now needs to be clearer about its direction, so 25bps in September and then 50bps in November wouldn't make sense to me. 

They should get in front of the slowdown and do 50bps in September, followed by a series of 25bps, and strongly forward-guide the path going forward, as this will settle the market. 

Yes, they might face some political backlash, particularly from Trump, if they cut by 50bps in Sept (which will be seen as a 'leg up' to Democrats), but this is more important: just get in front of the slowdown. It is now more than clear/obvious that the Fed should have cut Interest Rates at the July Meeting, but of course, they chose not to do so. 

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Cryptonary's take 

It seems that the market is desperate for more rate cuts, as this is positive for risk assets; however, the market is currently probably pricing in too much. It's likely we'll see 75bps or 100bps this year. 

However, as we move into the end of the year, and especially if we get a Trump victory, we should see risk assets (crypto) perform well again as these rate cuts come to fruition. Overall, in the last few weeks, we've seen a real flush out:

• Open Interest (leverage) has been reset.
• The Fear & Greed Index is at lows (extreme fear)on nearly all timeframes.
• Short-Term Holders in more substantial loss.

The above is a significant resetting in sentiment, which is typical and essential to get in the middle of a bull cycle, which we still believe we're in. 

Historically, September has been bearish, whilst Q4 is usually very bullish, so we remain on the side of holding long-term spot positions and looking to keep buying up weakness. We note that SOL and WIF are at their lows but have recently held up well compared to BTC. POPCAT, on the other hand, has just held up at a great level, nowhere near lows, but at the lows of the upper range. 

BTC - The grey box is for bidding if we get fills there.

The plan remains the same: hold spot positions and ride out the volatility. If you're struggling with this, turn your computer off and check in once per week. We're still very bullish for mid/late Q4 and most of 2025. Get these weak hands flushed out now—no panic here from us. 

Let's go!!!!!