Rate Hike Odds Volatility and Bitcoin's Brief Dip
QCP Capital's weekly market report highlighted that after Fed Chair Warsh's remarks at Jackson Hole, the probability of a September rate hike briefly surged from 35% to 70%. Bitcoin reacted with a 2.5% daily decline. However, the dollar failed to sustain hawkish pricing, with the DXY falling back below 99.5, allowing gold, silver, and Bitcoin to recover their losses. On the ETF front, after nine consecutive days of net inflows, Bitcoin ETFs recorded their first net outflow worth $202 million.
Treasury to Boost Long-End Liquidity, Bond Yields at 23-Year High
The U.S. Treasury announced it will launch its first long-end liquidity support operation on September 9, raising the purchase cap from $20 billion to at least $40 billion. The move aims to improve liquidity in the long-dated Treasury market. The 30-year bond auction yield came in at 5.216%, the highest since 2001, and market participants will closely watch whether the operation effectively eases long-end pressure.
Inflation Persists, Oil Surges on Geopolitical Events
On inflation, July PCE printed at 3.7% (core 3.3%) and CPI at 3.4% (core 2.5%), both indicating sticky price pressures. Brent crude rallied roughly 10% for the week following a reported attack in the Strait of Hormuz and a force majeure declared on Qatar LNG, further fueling inflation concerns.
Waller Signals Possible Pause, ADP Misses Badly
Fed Governor Christopher Waller stated that he would support a pause in rate hikes if incoming data over the next two weeks continue the current trend. Meanwhile, August ADP employment data came in at just 38,000, the weakest reading since January and far below expectations. As a result, the probability of a September rate hike has fallen back to the 45-50% range.