BlockBeats News, August 7th. The U.S. July Non-Farm Payrolls Report is about to be released, with the market expecting a job gain of about 80,000 to 83,000 and the unemployment rate to remain at 4.2%. However, recent employment data has shown significant divergence. As of August 1st, the initial jobless claims in the U.S. dropped to 199,000, staying below 200,000 for the third consecutive week, and July's corporate layoffs also saw a significant decrease. Yet, ADP only added 44,000 private sector jobs, hitting the lowest level since the beginning of this year, indicating that corporate hiring has not substantially expanded. Of particular note is that the U.S. labor force participation rate has fallen to 61.5%, the lowest since March 2021. Therefore, the 4.2% unemployment rate cannot be simply seen as a sign of a strong labor market, as some stability is due to a simultaneous slowdown in labor supply.

In this context, what will truly impact the market tonight is not just the mere addition of jobs, but whether employment, wages, and the unemployment rate will collectively reinforce the Fed's concerns about inflation. The Fed's Mester has stated that the possibility of inflation persisting above target is increasing and hinted at her inclination to raise interest rates at the recent FOMC meeting. The market has even begun discussing the possibility that if recent inflation data remains strong and expectations for borrowing costs rise, Powell may raise rates at the September meeting. This has made the policy linkage between employment and inflation data even more crucial.

At the same time, Powell has weakened forward guidance, forcing the market to rely more on economic data to judge the Fed's policy reaction function independently. JPMorgan Chase CEO Dimon supports this reform, believing that a reassessment of the Fed's policy framework is significant. However, he has also cautioned that the market has accumulated a large amount of leverage through primary brokers, hedge funds, ETFs, and Treasury arbitrage, with overall leverage still at high levels. When policy communication is reduced and market leverage is high, any changes in rate expectations could quickly transmit to asset prices.

Businesses are also facing a test of capital costs. Alphabet plans to raise up to $250 billion through the issuance of investment-grade bonds, while Tesla continues to advance the construction of its Texas TeraFab, requiring substantial capital investment in AI and computing power infrastructure. On the other hand, the Democratic Republic of the Congo has banned the export of copper and cobalt concentrates, and risks related to the Hormuz Strait have not yet been completely eliminated. Energy and critical raw material supply constraints could further drive up infrastructure construction costs. This suggests that the global capital markets are now facing not only interest rate issues but also pressures on funding, energy, and raw material costs simultaneously.

For the cryptocurrency market, this environment means that high-volatility assets like Bitcoin remain highly sensitive to U.S. dollar liquidity, long-term yields, and global risk appetite. If the Non-Farm Payrolls and subsequent inflation data reinforce rate hike expectations, the market's pressure will come not only from policy rates themselves but from the repricing of overall risk-free rates and funding costs. Conversely, if employment and inflation cool simultaneously, it could provide clearer policy space for risk assets. Therefore, what truly needs to be observed tonight is how the data will alter the Fed's reaction function and how this change will ultimately transmit to the dollar, long-term yields, and global capital costs.