Jobs Report vs. Powell: Who’s Really Holding the Beer in 2025?

Markets brace for another showdown—this time, it’s economic data versus Fed rhetoric. Will Powell’s poker face outlast the jobs numbers? Or will the report force his hand?

The Jobs Juggernaut

August’s labor data drops like a mic—unemployment ticks down, wages creep up. Traders scramble to parse the tea leaves. Spoiler: nobody agrees.

Powell’s Power Play

The Fed chair doubles down on ‘data-dependent’ waffling. Street whispers: ‘Translation: We’ll hike if stocks don’t throw a tantrum.’

Crypto’s Wild Card

Bitcoin traders yawn through the drama—same old macro dance. Meanwhile, DeFi yields quietly eat Wall Street’s lunch. (Take that, 0.01% savings accounts.)

Closing thought: If ‘transitory’ was the 2021 lie, ‘soft landing’ might be 2025’s. Place your bets.

The Dollar’s ascent just hit a crumbling wall of data

The dollar didn’t just take a wrong turn—it veered off the road entirely, plowed into the yield curve, and is now limping out of the wreckage. What started as a smooth glide higher for the greenback this week ended in a brutal reversal, after a calamitously weak US jobs report tore through the macro landscape like a rogue wave.

Friday’s NFP wasn’t just soft—it was revision-heavy, morale-crushing, and credibility-denting. July payrolls printed just 73K, dragging the three-month average down to 35K—a number more fitting for a stall-speed economy than one flirting with inflation risk. And that’s before even getting to the rot beneath the surface: full-time employment collapsed by 440K, while part-time jobs surged, pointing to employers quietly cutting hours and hedging ahead of tariff pass-throughs.

What made the report all the more potent was the preemptive strike from Fed dissenters Waller and Bowman—who issued rare, synchronized statements just 30 minutes before the release, signalling dovish intent. It didn’t feel coincidental. It felt coordinated—an unsubtle attempt to box Powell in if the data landed weak, which it did. Markets wasted no time repricing the curve: September rate cut odds are now fully priced, and short-end yields collapsed in a textbook policy-panic move.

The irony? Just days ago, the dollar was ripping higher on hawkish curve flattening. That MOVE now feels like a fever dream. USD/JPY was smashed from 151 to the low 146s in two sessions, while EUR/USD vaulted through 1.1500 and now eyes 1.16. A corrective dollar high looks locked in—and my Fall EUR/USD call of 1.16 has effectively arrived earlier than expected. If labour weakness deepens, 1.18 is no longer a stretch before October.

We’re now entering a phase marked by clashing forces: weakening labor data versus sticky inflation, amplified by Trump’s latest tariff barrage. And while the WHITE House is busy lobbing scorched-earth trade duties, the real damage may be domestic. ISM manufacturing data also underwhelmed, adding to the sense that Main Street is softening. This isn’t overheating—it’s stagflation with a labor twist.

Markets were being asked to believe two things at once: that inflation is too high to ease, and that the labour market is strong enough to endure tight policy. Today’s data just torched that logic. You can’t hike when the jobs engine is sputtering—and now it is, loud and clear.

Risk finally blinked on bad data. The S&P 500 fell nearly 2%, not on inflation fears, but on the growing realization that the “resilient US consumer” may be more mirage than miracle. If these job losses are real—and not just a statistical fluke—the Fed may have no choice but to cut, even as tariffs feed inflation through the pipeline. That’s a brutal corner to trade out of.

The dollar’s legs have been kicked out from beneath it. The rally was built on the illusion of labour market strength and tariff-driven inflation arriving on cue. But while inflation was being downplayed as transitory into Q4 ( hence an inevitable pullback in the USD), it was the jobs pillar that gave way. Wednesday’s USD/JPY squeeze and broad greenback surge already look like a terminal gasp.

If equities remain under pressure, USD/JPY and USD/CHF are likely to lead the dollar lower. Meanwhile, dollar-funded carry trades should come back into vogue, especially if rate differentials compress quickly. EMFX may stand to benefit most as investors seek higher yields beyond G10.

Bottom line: A tactical dollar top looks set at USD/JPY 150.50–151, and EUR/USD 1.1400–1.1450 is now the launchpad toward a more dovish Fed regime. What could flip the script? Very little. For now, the fall call has landed early—and the tide has turned.

Last week, it was about building asymmetry

There were two asymmetrical trades we laid out in last weekend’s blog: long the U.S. dollar and short equities. But in truth, there was a third leg to the strategy—hedging for T-Day.

The dollar long was the cleaner tactical expression to start the week. Strong GDP, sticky inflation, and Powell’s reluctance to pre-commit to cuts gave it a lift early in the week. And if you timed the exit right—or, like myself, simply left fixed targets and resting bids in the book—you likely walked away with a clean exit before Friday’s post-NFP reversal kicked in. And even then, it was a slow-motion reversal, and you had ample time to book profits and flip. I mean, you could buy 1.1450’s 6 -10 seconds after the print, and 1.1475-1.1500 was there for the picking for an hour.

The equity short required more nerve. Fading risk into blowout Big Tech earnings and AI mania isn’t an easy sell. But structurally, the cracks were visible—narrow leadership, soft macro undercurrents, and a market pricing perfection. The trigger was always going to be macro.

And then came T-Day.

That’s why we flagged tariff risk as a volatility hedge in the first place. Trump’s trade broadside on 69 countries wasn’t just headline noise—it was a market disruptor and grossly underpriced.

Effective tariff rates surged, economic risk crept back in, and equities that were already in pre-August month-end profit-taking mode just rolled over. It was the perfect exclamation mark on a week where the payoff was all about positioning ahead of the tape and staying honest to your profit-taking targets, particularly in terms of the long dollar trade.

This week sell the Dollar and buy the dip?

Unlike picking near-term tops in the dollar—which, when macro gears shift, tends to obey gravity with a specific mechanical precision—calling a top in U.S. equities on the back of one soft payroll print and a Fed edging toward dovishness is an entirely different beast. It's not just dangerous—it borders on reckless. This market isn’t floating on fundamentals; It’s being lifted by a mix of structural flows, relentless AI enthusiasm, and buy-the-dip muscle memory developed over a decade, now likely to catch a tailwind from rate cut fever.

And those forces haven’t gone anywhere.

Yes, Friday's punch landed. But if you're trying to sell this tape on the assumption that "bad news" will finally matter—be warned. You're stepping into a battlefield shaped less by data and more by passive allocation flows, massive corporate buybacks, and a tech sector that still commands religious conviction.

The Nasdaq's near-2% drop felt meaningful in the moment, but context matters: it followed a stretch where mega-cap names were melting higher like it was 2021 again. Even after Apple's slightly underwhelming guidance or Meta’s spending chatter, dips are still being monetized rather than feared. Microsoft, Amazon, Nvidia—they continue to pull disproportionate weight. This isn't a rising tide—it's a handful of tugboats dragging the market barge forward.

Meanwhile, positioning remains just cautious enough to keep the pain trade to the upside. Hedge funds trimmed exposure into the month-end systematic funds have dry powder, and real money has been playing catch-up all summer. Every wobble is seen as a setup for re-entry, not a reason to abandon ship.

Which brings us back to the Core risk: misreading the tape. A softer jobs report and Trump’s tariff theatrics may have triggered a knee-jerk repricing of rate expectations—but equity bulls don’t care if Powell cuts once or twice this year. They care about liquidity, earnings momentum, amid the relative lack of AI alternatives. And right now, the U.S. equity market—flawed as it may be—is still the best AI house in a burning neighbourhood.

So while Friday may have felt like a reality check, it wasn’t a regime shift. Not yet. If you're going to short this market into August, you'd better have more than just a weak NFP and some tariff smoke in your arsenal. Because until positioning flips and price confirms, this remains a rally with nine lives—and a whole lot of buy-side discipline underneath.

A bit of caution.

August: Where liquidity goes on holiday and traps come to play

August is the month where markets breathe—but not in a good way. Liquidity dries up like a tide pulling back, leaving fewer players on the field and exaggerated moves in the sand. It’s the kind of month where false breaks and whipsaws lurk around every corner because the usual depth of order FLOW simply isn’t there.

Europe is on holiday. North America is running skeleton crews. Even the big houses cut risk, leaving interns and algos to babysit the screens. A single headline—like Trump’s tariff volley this week—can have an outsized impact because the depth to absorb that shock just isn’t in the book.

Volatility can spike in August, not because the world is falling apart, but because markets are less able to handle normal flows. The VIX jumping above 20 this week is a case in point. When liquidity is thin, even routine rebalancing or macro hedges can look like directional conviction, leading to exaggerated moves.

August trends are notoriously unreliable. You think you’re catching a breakout, but half the time you’re trading in an echo chamber—chasing a move that gets faded by real money desks once everyone’s back after Labor Day. The risk-reward math is skewed; even good trades require tighter risk management and a willingness to take profits faster.

This August is even more treacherous because tariffs, weak payrolls, and looming Fed policy shifts are colliding with thin summer liquidity. The macro signals are real, but the price action exaggerates them, making it hard to separate signal from noise.

Seasonally, August has never been a trader’s darling. Historically, equity markets have struggled, while FX and commodities often get choppy and rangebound. That doesn’t mean there aren’t opportunities—it just means you need to be nimble, not stubborn.

Chart of the week

How US fiscal concerns are affecting bonds, currencies, and stocks

The bond market has started to sniff what equity traders are still content to ignore: the growing weight of fiscal excess. As U.S. budget deficits swell well beyond pandemic-era norms, concerns over debt sustainability are no longer confined to ivory-tower economists. They're showing up in the long end of the Treasury curve and, more recently, the dollar itself. Yields are nudging higher not because of inflation fears per se—but because buyers are beginning to price in the sheer volume of issuance ahead. The fiscal hangover is beginning to kick in.

And yet, equities—like a crowd that’s had one too many at the policy punchbowl—are still dancing. For now. There’s momentum in mega-cap tech, resilient consumer balance sheets, and just enough AI froth to keep the S&P afloat. But the floor isn’t as solid as it looks. According to Goldman Sachs' Jan Hatzius, speaking on The Breaks of the Game podcast with Tony Pasquariello, GDP growth is expected to crawl at just 1% this year, and the probability of recession is already double its historical norm at 30%. That’s a cautious base case—not a disaster, but a far cry from a booming backdrop.

The real sleeper risk, however, may be inflation—again. Hatzius notes that while tariffs have yet to fully work their way into headline prices, the expectation is that core inflation could re-accelerate by about a percentage point, pushing above 3%. That WOULD put the Fed in a tricky bind: faced with tepid growth but sticky inflation—hardly a recipe for a smooth policy path. In his words, “it’s going to continue to be a slog.”

So while traders eye the tape and cheer for the next AI breakout or rate-cut pivot, the fiscal termites are quietly chewing away beneath the floorboards. The question isn’t whether the structure holds today—it’s how much stress it can take if the macro weather really turns.

The long end of the Treasury curve is starting to blink red—not from inflation fears, but from growing doubts about the United States’ fiscal trajectory. As government deficits swell to eye-watering levels, the usual reflex—buying long bonds during growth slowdowns—is no longer a given. Rob Kaplan, Vice Chairman of Goldman Sachs, puts it bluntly: “Is the 10-year and longer duration still the SAFE haven, flight to quality, asset?” So far this year, the answer appears to be no. Despite downward revisions to GDP growth, long-dated Treasuries haven’t rallied, suggesting investors are beginning to demand a premium for funding Washington’s spending spree.

Goldman Sachs Research, for its part, sees this playing out not just in the bond market but also through a weaker dollar. As the U.S. moves deeper into structural twin-deficit territory, the greenback may struggle to maintain its dominant perch—particularly if rate differentials start to narrow on the back of Fed easing.

That’s where Ashok Varadhan, Goldman’s co-head of Global Banking & Markets, picks up the thread. He expects the yield curve to steepen as short-end yields fall faster than long-end rates, driven by Fed cuts rather than growth fears. “The question is whether the data warrants easing a little or a lot,” he says—a reminder that while inflation may be stickier than hoped, the Fed is still leaning toward loosening.

Yet for all the macro hand-wringing, Varadhan remains “super bullish” on equities. His Optimism stems not from multiple expansion or liquidity flows alone, but from something more structural: deregulation, skilled labor inflows, and the unrealized productivity gains of AI integration. “We're not even in the first inning of companies implementing AI,” he notes. “Once that company implementation happens, you get that productivity dividend.”

The big picture is a study in contrasts: a weakening dollar, an unanchored long end of the curve, and a Federal Reserve weighing cuts. And yet, equities continue to levitate on the promise that beneath the macro static, the micro—the AI transformation, the entrepreneurial dynamism, the American labor edge—still delivers. It’s not a clean narrative. But in a market addicted to the next tailwind, it just might be enough.