Data Divergence Ahead of Nonfarm Payrolls, September Rate Hike Suspense Mounts

The latest two sets of U.S. data have presented the market with a difficult puzzle.
The August ISM Manufacturing PMI fell from 55.6 to 54.6, below the expected 55.2, indicating that the pace of manufacturing expansion is slowing; however, the Prices Paid Index remained elevated at 71.1, showing that inflationary pressure has not cooled significantly.
The labor market is likewise stable on the surface but cooling underneath. July JOLTS job openings came in at 7.27M, higher than the revised June figure of 7.18M, but hiring fell by 278k to 278k, indicating that companies are not carrying out mass layoffs but are also becoming increasingly reluctant to hire.
The real problem is that rising oil prices continue to push up inflation expectations, while U.S. Treasury yields and the dollar strengthen in tandem. The market is currently pricing in a 66%—68% chance of a 25-basis-point Fed rate hike in September, while the 10-year U.S. Treasury yield briefly approached 4.8%.
Risk assets have already begun to come under pressure, with all three major U.S. stock indexes closing lower and the Nasdaq falling about 1%; BTC has also been oscillating repeatedly around $78,000.
The next key event is the August nonfarm payrolls report, scheduled for 20:30 Beijing time on September 4. If employment is too strong, it will further reinforce rate-hike expectations; if employment weakens significantly, it will fuel concerns about economic cooling. For BTC, the short-term narrative is no longer simply “bad data means a rally”; the market must also watch how the dollar, Treasury yields, and rate-hike probabilities are repriced.
Personally, I will focus on the strength of support around $78,000. Before the nonfarm payrolls report is released, chasing rallies or selling into declines can easily lead to getting whipsawed; the true direction may not be confirmed until after the data is published.
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