Another record high day for stocks, IDA impacting Northeast, bitcoin hovers around USD 50,000

US stocks are once again making fresh record highs ahead of the August employment report that could tilt the scales to support a November Fed taper.  The impact of Hurricane IDA did not end in the South, it is now being felt in the Northeast.  New York City and New Jersey are dealing with massive flooding and disruption to transportation services.  Any disruption to economic activity is just another reason on why it will take longer to satisfy the Fed’s substantial further progress goal.

A wrath of US economic data did little to move the needle on Wall Street, as jobless claims continues to decline, factory orders increases on strong demand, and as the trade deficit narrowed from record highs.  Jobless claims fell to 340,000, a fresh pandemic low, while continuing claims dropped from 2.86 million to 2.74 million.

FX

The dollar is getting picked on today after both Morgan Stanley and the Atlanta Fed GDPNow index showed dramatic cuts to US third-quarter gross domestic product forecasts.  Delays in reaching substantial progress in the labor market recovery will keep the Fed pumping up the economy and that should do wonders for the dollar’s major trading partners.  Treasury yields are steady, so currency markets might expect to see range trading until Friday’s employment report.

Bitcoin eyes NFP

A weaker dollar tentatively gave Bitcoin enough momentum to retest the USD 50,000 level.  Bitcoin has benefited from last week’s Fed Chair Powell’s dovish tapering speech.  With interest rate hikes remaining far away, bitcoin and most risky assets have had a good trading week.  Tomorrow’s nonfarm payrolls could swing expectations on how soon the Fed will be willing to announce tapering of asset purchases, so Bitcoin may have to hover around the USD 50,000 level.

The majority of this week’s crypto headlines covered scams, fraud, more governments embracing bitcoin, and legislation hurdles:  Eastern European-based victims sent USD 815 million to Ponzi schemes and scams from June 2020 to July 2021.  The SEC charged BitConnect founder over fraudulently raising USD 2 billion from retail investors.  Cuba is closer to recognizing and regulating cryptocurrencies.  Congress continues tries to draw up effective crypto rules.

Bitcoin bulls are eyeing a run towards the USD 60,000 level and that could very well be possible if the dollar continues to slide post nonfarm payrolls.  A soft nonfarm payroll report could fuel a risk-on mood that supports the idea that Fed may not be able to make a taper announcement until next year.  Bitcoin’s biggest risk over the next couple of weeks will be the Fed’s paper on central bank digital currencies.  If the Fed unleashes a crackdown on stablecoins, that could impair how some buy bitcoin.

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