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Good Morning!

Markets caught their breath after a wild ride, with European stocks eyeing a muted open and Asian shares clawing back some losses. But the real drama's yet to come – all eyes are on Friday's U.S. job report. Traders are placing their bets on the Fed's next move, with whispers of a hefty 50 basis point cut gaining traction. Meanwhile, the yen's flexing its safe-haven muscles, and the BOJ's hinting at a potential rate hike. This week's economic data might just rewrite the playbook.

In today’s email:

• FedWatch: Politics complicating Fed’s job?

• Bitcoin: Bitcoin sub $57k with further weakness ahead?

• EigenLayer: ‘Stakedrop’ incoming

• Gold: Excellent portfolio diversifier still holding strong above $2500+

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THE BIG IDEA

The Federal Reserve faces a critical decision on rate cuts, balancing labor market health, inflation concerns, and political considerations amid economic uncertainties

The Fed's monetary policy is coming upto a crucial juncture. San Francisco Fed President Mary Daly's dropped a bombshell, advocating for interest rate cuts to preserve our job market's mojo. But the million-dollar question remains: how deep should they go?

It's a high-stakes game, with the Fed trying to avoid toppling the tower. Andrew Law, Caxton Associates' head honcho, is championing a "swift and significant reset" in rates. He's sounding the alarm, warning that the Fed risks turning "passive-aggressive" if it drags its feet.

Looking back, Law sees echoes of past "soft landings" where the Fed acted before the job market took a nosedive. But this time, the plot thickens with a presidential election looming on the horizon.

Can the Fed make its move without getting entangled in political drama?

Meanwhile, the housing market's sending out SOS signals, with affordability plummeting to levels not seen since Miami Vice was prime-time TV. It's a stark reminder of how the Fed's decisions ripple through every corner of our financial lives.

Here's the kicker: the Fed's got a narrow window to act. With monetary policy changes taking 6-12 months to percolate through the economy, September's meeting could be their last shot before election fever takes hold. The pressure's on to thread the needle between maintaining a robust job market and keeping inflation in check.

As we hurtle towards this pivotal moment, one thing's clear: whether the Fed goes big, plays it safe, or gets caught flat-footed, the repercussions will echo through Wall Street, Main Street, and beyond!

MARKETS AT A GLANCE

TOP NEWS

Weak job openings data fuels market jitters and rate cut expectations ahead of the crucial August payroll report

July's job openings hit a three-year low, sending stocks on a wild ride and bond yields into a nosedive. Traders are now betting big on the Fed slashing rates by year-end, with the odds of a 100-basis-point cut skyrocketing. All eyes are on Friday's payroll report – will it be the plot twist that confirms our recession fears or the hero that saves the day?

Electronic bond trading is gaining momentum in Europe, with Bank of America reporting significant growth in portfolio trading and derivatives volumes

Europe's bond market is finally catching the digital wave! Bank of America's Sonali Theisen spills the tea on the electronic trading boom, with portfolio trading volumes skyrocketing five-fold in just six months. It's an arms race out there, with banks scrambling to upgrade their tech game. The Holy Grail? A consolidated tape to unify Europe's fragmented data. Looks like the Old Continent's finally ready to play catch-up with Uncle Sam's bond market.

Saudi Arabia's rising fiscal breakeven oil price poses challenges as the kingdom pursues ambitious economic diversification plans amid global oil market uncertainties

The House of Saud's facing a royal conundrum. Their fiscal breakeven oil price is soaring faster than a magic carpet, hitting a projected $96.20 per barrel for 2024. That's a 19% year-over-year jump, thanks to Vision 2030's mega-projects. But don't write off the oil kingdom just yet – they've got a few aces up their sleeve. With low debt, hefty reserves, and a diversifying economy, Saudi Arabia's not about to let its golden goose slip away. The real wildcards? Global oil demand and those pesky non-OPEC producers.

CRYPTO

Robinhood settles with California for $3.9M over past crypto withdrawal restrictions, highlighting evolving regulatory landscape

Looks like Robinhood's past came back to haunt it. The trading app just coughed up $3.9 million to settle with California over its former policy of preventing crypto withdrawals. From 2018 to 2022, Robinhood played keep-away with users' digital assets, violating state commodities law. Now they're forced to keep the withdrawal gates open and polish up their custody disclosures. Talk about a costly lesson in "not your keys, not your coins."

Analysts predict a potential 15-20% Bitcoin price drop following an expected Fed rate cut, contrary to market hopes

The Fed's impending rate cut might not be the rocket fuel Bitcoin bulls are hoping for. Bitfinex analysts are throwing cold water on the party, warning of a potential 15-20% nosedive to the $40-50k range. September's historically volatile for BTC, and this rate cut could add extra spice to the mix. While lower rates usually make risky assets like crypto more appealing, we might be in for a plot twist this time around.

Bitcoin's Entity-Adjusted NUPL signals growing market uncertainty as it trends downward, mirroring patterns from previous cycles

Bitcoin's Entity-Adjusted NUPL - a fancy way of measuring real economic activity - has been on a downward slide since mid-2024. We've gone from profit paradise to flirting with loss territory faster than you can say "HODL." This bearish shift echoes the aftermath of 2017 and 2021's bull runs, hinting at possible market corrections ahead. But don't panic yet - history shows these dips often precede a bounce back. For now, it's clear the sub-$60k Bitcoin is keeping traders on their toes.

EigenLayer announces second "stakedrop," distributing 86 million EIGEN tokens amid sector-wide TVL declines

EigenLayer's cooking up a fresh batch of crypto goodness with its season 2 "stakedrop." They're dishing out 86 million EIGEN tokens to the faithful - stakers, node operators, and ecosystem buddies alike. It's a tasty 5% of the total supply pie, with the lion's share (70 million) going to those who've been staking and operating. But here's the plot twist: EigenLayer's TVL has been on a diet, shrinking from a beefy $20.1 billion to a leaner $11.5 billion. Is it post-airdrop fatigue hitting the sector?

GOLD

Gold's role in portfolios is shifting due to changing market dynamics, with potential benefits for diversification despite recent correlation breakdowns

Gold's playing a new tune in the investment world. Once a reliable dance partner with real yields, it's now grooving to a different beat. Central banks are loading up their vaults citing "geopolitical tensions," while Chinese households are swapping property dreams for golden gleams! But here's the kicker - Western investors are giving gold the cold shoulder, eyeing those juicy bond yields instead. Despite this mixed bag, Schroders' latest report shows gold still has some moves. It could be your portfolio's secret weapon, potentially boosting returns without cranking up the risk dial. Just don't expect it to be your knight in shining armor during every market meltdown. The golden rule? A modest allocation might just add some sparkle to your investment strategy.

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