The Bitcoin (BTC) price is holding within recent ranges to the north of the $29,000 level in the wake of the latest mixed US jobs report for July.
The report revealed that the US economy added 187,000 jobs in July, below the expected gain of 200,000.
Moreover, June’s job gain of 209,000 was revised lower to a job gain of 185,000.
However, a separate survey of households revealed that the unemployment rate had unexpectedly declined to 3.5% from 3.6% in June.
Average hourly earnings growth was also stronger than expected, rising 0.4% MoM in July against expectations for an increase of 0.3%, pushing the YoY rate up to 4.4%.
Something For Everyone
On the one hand, the rate of job gains in the US is clearly trending lower, with the headline July NFP reading its lowest since early 2021.
That is a sign that heat is coming out of the jobs markets, something the Fed wants to see, as a hot jobs market makes tackling still too-high US inflation more difficult (or impossible, some would say).
But then again, still super low (by historic comparison) unemployment rate and wage growth that remains well above the Fed’s 2.0% inflation target show that the labor market remains too hot for the Fed’s liking.
Fed Tightening Cycle Likely Done, Markets Think
Investors seem to have taken the view that the latest jobs report doesn’t change the narrative much regarding expectations for Fed tightening.
According to the CME’s Fed Watch Tool, US interest rate futures pricing implies an 86% chance that the central bank leaves rates unchanged at the next meeting in September, a tad higher than prior to the data release.
Markets then assign a roughly 75% chance that rates are left at their current or lower levels for the remainder of the year, again, not much changed versus prior to the data release.
US interest rate futures currently assign a roughly 60% chance that the Fed will have begun cutting interest rates by next March.
In sum, the market’s base case appears to be that the Fed’s tightening cycle is now done before gradual cuts begin in 2024.
Commentary from Fed policymakers themselves lends support to this thesis.
While Chairman Jerome Powell will continue to try to leave the door open to more rate hikes, in order to ensure financial conditions don’t ease prematurely, Fed Bank of Atlanta President Raphael Bostic was on the wires on Friday saying he doesn’t see the need for any more hikes to ease inflation, a view likely shared by plenty of other Fed policymakers.
What This Means for Bitcoin (BTC)
So, with the US labor market gradually cooling off and inflation steadily moving in the right direction, it appears that the Fed is pretty done with tightening.
Given the fact that 2022’s aggressive tightening was a key driver of the bitcoin bear market last year, an end to the tightening cycle should be taken as a positive for the bitcoin price.
Still, the end to a tightening cycle doesn’t mean that a sudden easing of financial conditions and a sudden jump in liquidity is on the horizon.
With the US economy outperforming expectations in the first half of 2022, the jobs market still also consistent with a strong economy and inflation still well above the Fed’s 2.0% target, the case for substantial financial easing right now is weak.
Just as macro isn’t a big headwind to bitcoin right now, it isn’t a massive tailwind either, and probably won’t become one until we are having more serious discussions about a US recession and rate cuts.
For now, updates on more crypto-specific themes such as institutional adoption (spot bitcoin ETF applications and corporate whales like Tether and MicroStrategy) and regulation (the SEC’s regulation by enforcement approach and global efforts to pass crypto regulation) are likely to have a bigger impact on the price.
Technicals will also remain important, with technicians currently questioning whether bitcoin can hold to the north of its 2023 uptrend, which it appears to be coming close to retesting once again.