Asset prices reflected an optimistic mood on Wednesday, as Bitcoin (BTC) regained the $112,000 level, trading at $112,366.98, while European stocks opened higher, with analysts increasingly emphasizing that the odds of recession or stagflation raised by the shocking US jobs data are receding.

The US Bureau of Labor Statistics (BLS) published a striking update on Tuesday, showing that the economy likely added 911,000 fewer jobs than previously reported over the 12 months through March 2025.

For much of last year, equity and crypto investors bet that a strong labor market would keep the economy on track despite persistent inflation. That optimism was shaken on Tuesday, as Bitcoin quickly dropped from $113,000 to $110,800.

Some market participants viewed the BLS revision as evidence of an imminent recession, but Michael Englund, Chief Economist at Action Economics, said the data revealed little about the business cycle or the health of the economy.

Englund wrote in an email to CoinDesk: “These revisions tell us more about the structural path of the US labor force than about where we are in the business cycle. They did not raise our assessment of recession risks, even if they indicate that the long-term trend for monthly job growth has shifted from hundreds of thousands into the tens of thousands. We now assume structural labor force growth of 90,000 jobs per month, compared with 150,000–200,000 jobs during most of the current expansion.”

He explained that the sharp post-COVID growth in the US labor force, which exceeded economists’ expectations, was driven largely by net annual immigration of about one million people. But the trend has now reversed into negative net migration estimated between one and two million people.

Englund added: “This shift toward a lower and more stable labor force growth path means slower growth in civilian employment as measured by household surveys or nonfarm payrolls.”

Financial markets appear to be adopting this view, as European equities opened higher today while Bitcoin regained the $112,000 level. Alternative tokens such as Ether (ETH), Ripple (XRP $2.9722), and Dogecoin (DOGE $0.2401) also recovered much of Tuesday’s losses. Solana (SOL) surged to $222, its highest since February 1. S&P 500 futures traded 0.3% higher, and European equities posted early-session gains.

Stagflation Fears “Overdone”

The BLS revisions and upcoming US consumer price index (CPI) data, expected to show inflation holding near 3% (well above the Fed’s 2% target), reignited discussion of stagflation — the mix of high inflation, high unemployment, and weak growth that is considered the worst scenario for high-risk assets like Bitcoin.

But those fears look overstated, according to Marc Chandler, Managing Partner and Chief Market Strategist at Bannockburn Global Forex, who noted that US GDP is still growing above the Fed’s estimates for the “non-inflationary path.”

Chandler told CoinDesk: “I think stagflation talk remains exaggerated. The Atlanta Fed GDP tracker is still showing growth well above the Fed’s non-inflationary path.”

He added: “Yes, inflation is a bit high and may rise with Thursday’s CPI data, but Fed officials like Waller and Bowman want to look through tariff-related increases. It seems clear to me the Fed will resume easing next week.”

Traders are now pricing a 91% chance of a 25-basis-point Fed rate cut to 4% at the September 17 meeting, according to the CME FedWatch tool. Some investment banks and market participants are also expecting a larger 50-basis-point cut.

Focus on US CPI Data

Easing expectations may strengthen if Wednesday’s producer price index (PPI) and Thursday’s consumer price index (CPI) show surprise signs of cooling inflation, supporting high-risk assets at elevated levels in the near term.

But these elevated expectations could set markets up for disappointment.

Greg Magadini, Director of Derivatives at Amberdata, said: “I think this week’s CPI data will give us more context… If markets expect a 50-basis-point cut but the Fed delivers only 25 at the September 17 meeting, we’ll see broad-based selling.”

Oil prices rose on Wednesday after Israel launched an attack on Hamas leaders in Qatar and Poland shot down drones, while the United States pushed for new sanctions on buyers of Russian oil. However, fears of oversupply capped further gains.

Brent crude futures rose 56 cents, or 0.8%, to $66.95 a barrel by 08:35 GMT. US West Texas Intermediate crude also gained 56 cents, or 0.9%, to $63.19 a barrel.

Prices had closed 0.6% higher in the previous session after Israel announced it had targeted Hamas leaders in Doha. Both benchmarks initially jumped nearly 2% immediately after the attack but later gave up most of those gains.

Elsewhere, geopolitical tensions intensified after Poland shot down drones during a large-scale Russian attack on western Ukraine on Wednesday, marking the first time a NATO member has fired in the context of the war. However, there was no direct threat of supply disruption.

Analysts at SEB Bank said: “The dark cloud of oversupply continues to hang over the market, with Brent trading about $2 below its levels from last Tuesday. Geopolitical risk premiums in oil rarely last unless supply disruptions actually occur.”

Meanwhile, US President Donald Trump urged the European Union to impose 100% tariffs on China and India as part of a strategy to pressure Russian President Vladimir Putin, according to informed sources.

China and India are among the biggest buyers of Russian oil, which has helped Moscow bolster its finances since the 2022 invasion of Ukraine.

Analysts at LSEG said: “Uncertainty remains over how far the US administration is prepared to go in this direction, as aggressive measures could conflict with efforts to control inflation and impact the Federal Reserve’s ability to cut interest rates.”

Traders expect the Fed to cut rates at its September 16–17 meeting, which would boost economic activity and oil demand.

However, supply expectations remain tilted to the downside. The US Energy Information Administration warned that global crude prices will remain under heavy pressure in the coming months due to rising inventories as OPEC+ increases production.

Data from the American Petroleum Institute released Tuesday also showed that US crude, gasoline, and distillate stocks rose last week, according to market sources, with official government data due at 14:30 GMT.

The US dollar held steady on Wednesday ahead of this week’s US inflation data, which may help shape expectations for Federal Reserve policy, while geopolitical tensions boosted safe-haven currencies such as the Swiss franc.

Employment data released last week showed the US economy created far fewer jobs over the past year than expected, making a Fed rate cut next week appear almost certain.

However, this weakness has not been reflected in stock market confidence, as indexes continue trading at record highs, and it has not had a direct impact on the dollar, even as investors assess the possibility of a half-point cut next week.

Investor concerns have intensified with recent geopolitical developments, as Israel launched an airstrike on Qatar targeting Hamas leaders on Tuesday, while Poland shot down drones that entered its airspace during a Russian attack on western Ukraine on Wednesday.

Jane Foley, Head of FX Strategy at RaboBank, said: “The market has made up its mind, rightly so, that the Fed will cut rates. But much of this easing has already been priced in through the end of next year.” She added: “On the other hand, geopolitical uncertainty, such as the news from Poland and Qatar, is not reassuring.”

The euro was steady against the dollar but jumped 0.5% against the Polish zloty to 4.268, its largest daily gain in three months.

As for Fed expectations, traders are currently fully pricing in a quarter-point cut next week, with only a small chance of a half-point cut. Analysts noted that wholesale inflation data due Wednesday and consumer inflation data on Thursday could influence the likelihood of a larger move.

Kieran Williams, Head of Asia FX Trading at InTouch Capital Markets, said: “The bar for a 50-basis-point cut is high. It would require a clear downside shock in core inflation for the doves to have cover.” He added: “Given the stickiness of services prices and the Fed’s preference for gradualism, a large cut next week looks unlikely, but the data will determine how aggressively the market prices the easing path through year-end.”

In another development, uncertainty increased with the resignations of the prime ministers of France and Japan this week, raising questions about the economic and political outlook in two of the world’s seven largest economies.

The euro was little changed at $1.1702 after falling 0.5% in the previous session, while the yen was steady at 147.49 per dollar, and the Swiss franc remained near a seven-week high, with the dollar trading at 0.798 francs.

The dollar index, which measures the US currency against six major counterparts, was flat. However, it has fallen 10% since the start of the year, pressured by turmoil in US trade and fiscal policy and growing concerns over central bank independence.

Markets showed little reaction to a court ruling that temporarily blocked President Donald Trump’s attempt to dismiss Fed Governor Lisa Cook, a case expected to end up at the US Supreme Court.

Data released Tuesday showed the US economy created 911,000 fewer jobs than previously estimated in the period through March, indicating that the slowdown in job growth had already begun before Trump’s imposition of strict tariffs on imports. However, this data did not provide a clear picture of job creation after March, leaving Fed rate cut expectations unchanged for now.

Matt Simpson, Senior Market Analyst at City Index in Brisbane, said: “I think a 50-basis-point cut could do more harm than good at this stage.” He added: “Moreover, the Fed will want to preserve its image and not appear to be bowing completely to Trump’s wishes.”

He continued: “Markets are already pricing in three cuts over the next three meetings, and the Fed is well positioned to align with these expectations or even boost the odds of further cuts in 2026 — without resorting to a 50-basis-point move next week.”

Gold prices rose in the European market on Wednesday, resuming gains that had paused yesterday amid correction and profit-taking, moving once again near all-time highs as safe-haven buying continues. Gains, however, were capped by the rebound of the US dollar in the foreign exchange market.

A series of weak US labor market data has increased expectations that the Federal Reserve will deliver deeper interest rate cuts. To reprice those expectations, investors are awaiting the release of key US inflation data starting today.

Price Overview

• Gold prices today: Gold rose by 0.6% to ($3,648.49), from the opening level at ($3,626.39), recording the lowest at ($3,620.79).

• At Tuesday’s settlement, gold prices lost 0.3%, marking the first decline in three sessions due to correction and profit-taking, after earlier reaching an all-time high of $3,674.80 per ounce.

US Dollar

The dollar index rose on Wednesday by 0.2%, extending gains for the second consecutive session as the recovery from a seven-week low continues, reflecting the rebound of the US currency against a basket of global counterparts.

In addition to buying from lower levels, the US dollar’s rebound comes ahead of the release of key US inflation data, which will provide decisive evidence on the likelihood of US interest rate cuts in September and October.

Concerns over Federal Reserve stability have eased, especially after President Trump was blocked from dismissing Fed Governor Lisa Cook while the lawsuit remains ongoing in US courts.

US Interest Rates

• Data from the Bureau of Labor Statistics showed payroll numbers were revised down by 911,000 jobs over the twelve months through March. In the preceding twelve months through March 2024, employment was revised lower by 598,000 jobs.

• According to the CME FedWatch tool: the probability of a 25-basis-point rate cut in September is currently priced at 100%, with a 10% chance of a 50-basis-point cut.

• The probability of a 25-basis-point cut in October is also currently priced at 100%, with an 8% chance of a 50-basis-point cut.

• To reaffirm these odds, investors are awaiting key US inflation data throughout this week ahead of next week’s Federal Reserve meeting.

• Later today, producer price data for August will be released, serving as a leading indicator for September’s consumer prices. Consumer price data for August will be released tomorrow, Thursday.

Gold Performance Outlook

• Kyle Rodda, market analyst at Capital.com, said: Sentiment is extremely optimistic. Several key factors are currently supporting gold prices, most importantly expectations of a US interest rate cut.

• Rodda added: The short-term outlook depends heavily on inflation data. If it comes in higher than expected, the odds of a rate cut could slip slightly from the curve, which may trigger a pullback in the gold market that is currently in technically overbought territory.

SPDR Fund

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained unchanged yesterday, keeping the total at 979.68 metric tons, the lowest since August 29.