Jerome Powell provides relief for crypto and stocks

GB Market Commentary 01/12/2022

by Marcus Sotiriou

Bitcoin continued its relief rally yesterday, after weak U.S. economic data was released. The rate of private payroll job growth slowed in November, which potentially shows that the tight U.S. labour market is beginning to cool off. The ADP National Employment Report released yesterday showed that companies added 127,000 jobs last month, which was significantly less than the expected gain of 200,000.

This provided a boost for stocks and crypto, as weak economic data means that the Federal Reserve’s actions to fight against inflation are finally working, after multiple rapid interest rate hikes. The sooner that the economy slows down, the sooner the Federal Reserve can stop withdrawing liquidity from the market.

Chief economist at ADP, Nela Richardson, believes that U.S. economy is starting to feel the pain, as he said, "turning points can be hard to capture in the labour market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains. In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting, and the post-pandemic recovery is stabilizing."

Jerome Powell agreed with the view that persistent inflation is starting to unwind, as he said yesterday, “the time for moderating the pace of rate increases may come as soon as the December meeting.” The Federal Reserve Chairman essentially dismissed inflation lasting much longer and turned very optimistic about getting a hold on inflation soon.

The weakening jobs data could be having an impact on the Federal Reserve’s stance, and hence could lead to the stock market and crypto rising sooner than many predict.