🧊 Fed's playing cool with interest rate cuts?

Good Morning!

The financial world's been on a wild ride this week, but who knew a single U.S. jobless report could turn the tide? After Monday's panic attack, markets are bouncing back faster than a trader's heartbeat. Japan's Nikkei, which took a 13% nosedive, is now surfing a 1.6% wave, nearly erasing its losses. The yen's rollercoaster seems to be slowing, but don't count out those carry trades – they're still a $4 trillion behemoth. Even China's throwing us a curveball with inflation rising more than expected. Europe's looking perky too, with FTSE and DAX set to strut their stuff. As the dust settles, maybe we can all catch our breath and enjoy the Olympic finale in Paris.

In today’s email:

• Fed Watch: Fed’s playing cool

• Bitcoin: Bitcoin reclaimed $62k briefly!

• Dollar: Near one week high

• Gold: Rebounding along with broader market

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THE BIG IDEA

Fed's cool head prevails amid market heat

Hold your horses, market mavens! Despite the recent job market hiccup and ensuing stock market jitters, the Fed's keeping its cool. Some speculators thought we might see an early rate cut, but the odds aren't in their favor.

Chicago Fed President Austan Goolsbee reminded us that the Fed's not in the business of playing stock market savior. Their mission? Employment and price stability, folks. While some analysts are betting on a half-point cut in September, an emergency move is off the table.

Here's the kicker: unlike past crises, we're not seeing the same level of market mayhem. Remember the Russian financial crisis, the dot-com bubble burst, 9/11, or the 2008 meltdown?

Those were different beasts entirely, with credit markets in chaos and bond spreads doing the cha-cha

This time around, it's more of a gentle stumble than a full-on face plant. Sure, unemployment ticked up to 4.3% in July, but recent data on jobless claims has calmed some nerves. The market's even dialed back its expectations, now split between a quarter-point and half-point cut for September.

All eyes are on Fed Chair Jerome Powell's upcoming Jackson Hole speech. But don't expect fireworks - he's likely to stick to his guns and keep September on the table for a potential rate cut, depending on incoming data.

So, while the Fed's shown it can move fast when needed (hello, COVID-19 response!), this time it's playing the long game!

MARKETS AT A GLANCE

TOP NEWS

'Covered call' ETFs stumble in market volatility, raising questions about their effectiveness

These popular funds, marketed as low-volatility investments with equity-like gains and bond-style income, have seen assets surge to $80bn. However, recent market turbulence exposed their vulnerabilities. JPMorgan's Equity Premium Income fund, for instance, underperformed the S&P 500 in August. Critics argue these funds struggle in volatile markets and may not outperform traditional portfolios long-term. While defenders highlight their income potential, experts caution they're not suitable for all investors, especially those seeking long-term growth. The episode underscores the importance of understanding investment products' limitations and intended uses.

Dollar holds near one-week high after positive U.S. jobless claims, while yuan climbs on stronger inflation data

The greenback's playing king of the hill this week, perched near a one-week summit against its currency cohorts. What's got it so chipper? A surprise drop in U.S. jobless claims that's got everyone rethinking their recession doom and gloom. Meanwhile, China's yuan is strutting its stuff after some unexpectedly spicy inflation numbers. The yen and Swiss franc are nursing their wounds after Monday's safe-haven party, while risk-loving currencies like the Aussie dollar are feeling frisky. Even Bitcoin's getting in on the action, hitting a one-week high. Who said finance was boring?

Global oil demand growth lags, challenging OPEC+ supply increase plans

OPEC+ faces a dilemma as global oil demand growth, particularly from China and the U.S., falls short of expectations. With recession fears looming, the group may need to reconsider its October production hike. Analysts question whether demand can absorb the planned increase, especially with oil prices below $80 per barrel. Conflicting demand estimates from OPEC and IEA further complicate the picture. China's sluggish economy and the U.S.'s mixed consumption data add uncertainty. OPEC+ has a month to decide, but the market's ability to handle more supply remains in doubt.

CRYPTO

Bitcoin funding rates reveal shifting market sentiment from 2021 to 2024

Glassnode data shows dramatic changes in Bitcoin futures perpetual funding rates, reflecting evolving market sentiment. Early 2021 saw a spike in positive rates, coinciding with Bitcoin's surge to $64,000, indicating bullish dominance. Mid-2021 to early 2022 experienced volatile, declining rates alongside price drops, with occasional negative rates signaling bearish periods. 2024 has shown more stable, low funding rates, often near zero, suggesting a balanced market despite gradual price declines from mid-year highs to around $55,000 in August. These shifts highlight the dynamic nature of market sentiment in the crypto space over time.

Bitcoin's surge past $62,000 revives bullish $100,000 year-end predictions

Bitcoin briefly touched $62,000, sparking renewed optimism among bulls. The rally, mirroring strong performances in traditional markets, saw $100 million in short positions liquidated. Analysts attribute the surge to favorable stock market sentiment and Bitcoin's historical cycle patterns. Some, like Michael Terpin, see potential for Bitcoin to reach $100,000, especially if Trump wins the election. The crypto market broadly benefited, with Ether, Toncoin, Solana, and Cardano all seeing significant gains. This rally marks a sharp reversal from earlier week losses, reigniting discussions about Bitcoin's long-term trajectory.

Solana developers swiftly address critical security vulnerability with coordinated patch

Solana's team executed a rapid, strategic response to a critical security issue. The process began on August 7th with discreet notifications to network operators. A patch was made available via GitHub, allowing independent verification. By August 8th, detailed implementation instructions were distributed, securing 66.6% of the network's stake. Public disclosure followed once 70% of the network was patched. Solana Labs then urgently called for remaining operators to update. This coordinated effort demonstrates Solana's commitment to network security and its ability to respond swiftly to potential threats, highlighting the importance of rapid, collaborative action in maintaining blockchain integrity.

Donald Trump Jr. unveils plans for a DeFi crypto platform to challenge traditional banking

Trump Jr. announced he's developing a decentralized finance platform aimed at addressing banking inequality, not launching a memecoin as some had speculated. The project, still in early stages, aims to "take on the banking world" by providing financing options to those typically excluded. Trump Jr. cited personal experiences with debanking as motivation. While details are scarce, he emphasized fairness and official announcements to come. The news follows cryptic social media posts from both Donald Jr. and Eric Trump hinting at crypto involvement, sparking initial rumors about memecoins.

GOLD

Gold rebounds after five-day slump, mirroring broader market rally

After a five-day nosedive, gold's making a comeback faster than you can say "bullion." The shiny stuff bounced back to $2,415 an ounce, riding the coattails of a wider market upswing. What sparked this golden turnaround? Unemployment claims took an unexpected dive, easing recession fears and giving risk assets a boost. It seems even precious metals aren't immune to the market's mood swings.

UAE cracks down on gold refineries in anti-money laundering push

The UAE's flexing its financial muscles, suspending 32 gold refineries in a bold move against money laundering. These plants, about 5% of the UAE's gold sector, racked up 256 violations, from sloppy risk assessment to skipping terrorism watchlist checks. It's part of a broader cleanup as the UAE polishes its tarnished financial reputation. With gold prices hitting record highs, the stakes in this glittering game have never been higher.

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