A grounded NFP report added 139k jobs in May and above Wall Street consensus of 126k, though job creation was heavily concentrated in leisure & hospitality and healthcare, with outright losses in government and manufacturing. Details of the report were slightly softer with the unemployment rate rising from 4.19% to 4.24%, and would have been higher to 4.6% if not for the drop in the labour force.

Equities prices rallied along with rising bond yields with NFP faring better than the higher frequency claims data, even as hard data is finally catching-down to the softening survey data that has been widely expected by Wall Street for a long time. Furthermore, with the softening geopolitical stance since Liberation Day, not to mention the local tensions within Trump’s internal sphere, markets are currently back in the bad news = good news regime, where markets are looking for every excuse to urge further Fed cuts.

While the passage of the ‘Big Beautiful Bill’ remains in jeopardy given the slim margin of error, market sentiment has recovered back to the highs with volatility indices and credit spreads falling back to all time lows. The collapse in VIX has been one of the fastest in history, even including the Covid period, with the main casualty being the USD post the liberation day flip-flop.

Speaking of the USD, we are entering into a new correlation regime where equity prices are now moving positively with the dollar, a rare occurrence and the first sustained break since covid. This reflects that US equity prices are now moving more as a function of international flows, rather than implied Fed rate moves, as markets focus on what President Trump’s flip-flop on policies will mean for US assets.

On the bond side, yields have generally moved in sync with the dollar move in non-crisis environments, but the relationship has broken since Liberation Day, where yields have moved higher against a weaker USD, historically a sign of lower forward Fed rates. The divergence will likely continue until we get further resolution on the spending package and the elusive trade deals that may or may not come from the Trump cabinet over the next couple of months.

Looking ahead, this week will be an important litmus test for risk as we see long-dated treasury auctions mid-week, coupled with renewed US-China trade talks following the recent re-escalation. Any progress in trade talks will revolve around breakthroughs on rare earth tensions, while treasuries will have to contend with the upcoming CPI release into the 10y and 30y coupon supply.

Markets are expecting around a 0.25% MoM increase in core CPI, with limited cost push effect from tariffs until later in the summer, and building a case for Fed cuts to resume in late Q3 / early Q4 of the year.

Over in crypto, last week was a choppy week without a lot to note in the blockchain native space, with all the action happening on the TradFi side with the Circle IPO and continued banking activities. ETF flows were mixed in BTC, but positive in ETH, where they saw consecutive 14 days of inflows totally over $800M, and ETH futures open interest rising to record highs on CME.

Circle’s IPO came as a roaring success, with the stock popping nearly 4x post-listing with a market cap of ~$32bln. Crypto banking activity has been busy with Robinhood closing its $200M acquisition of Bitstamp, and Gemini filing for an IPO on the back of the red-hot public market sentiment.

Interestingly, we don’t think this necessarily is a straight line bull case for the likes of BTC or ETH, as there are now more options for the average investor to be exposed to crypto, either through one of the ETFs, MSTR and all the Bitcoin treasury proxies, and now with incoming exchanges and regulated stable issuers.

The current cycle will only get more nuanced as crypto matures as a viable macro asset class. Good luck and good trading this week!