Markets Stuck Between Tariffs and Tensions

Markets Stuck Between Tariffs and Tensions‍

Markets remained cautious as the U.S.–China tariff truce was extended, but hotter-than-expected U.S. inflation data and geopolitical shocks sent mixed signals.

• Tariff Truce Extended 90 Days
  President Trump extended the U.S.–China tariff pause until Nov. 10, avoiding a near-term escalation. Tariffs remain at 30% for Chinese imports (10% “reciprocal” + 20% “fentanyl” surcharge), while China’s retaliatory measures also stand. The truce buys time ahead of U.S. elections and China’s economic planning cycle. However, structural frictions - IP, tech access, industrial subsidies, remain unresolved.
• PPI Inflation Surprise
  U.S. July Producer Price Index shocked to the upside:
  • Headline: +0.9% MoM (vs. +0.2% est) - biggest jump in 3 years
  • Core: +0.9% MoM (vs. +0.2% est)
    Markets quickly dialled back September Fed cut bets. 10Y yields climbed.
• Volatility Remains Compressed
  With macro catalysts scarce and the Genius Act largely priced in, implied volatility continued to drift. Markets appear coiled, not trending, waiting for a breakout trigger.

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U.S. Treasury: No Direct Bitcoin Purchases But Reserve Strategy Remains Flexible

• Initial Statement: Treasury Secretary Scott Bessent said the U.S. does not plan to purchase additional Bitcoin for its strategic reserve, which currently holds between $15–$20 billion in seized assets. He emphasized a halt to selling, confirming the U.S. will continue building the reserve solely through confiscations.
• Clarification & Backtrack: Later the same day, Bessent clarified on social media that the Treasury is open to acquiring more BTC through “budget-neutral pathways,” suggesting potential conditional flexibility in the policy.

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Standard Chartered Lifts ETH Target

• Standard Chartered upgraded its 2025 ETH target from $4,000 to $7,500, calling for an ATH break by Q3.
• Long-term projections:
  • $12,000 by 2026
  • $18,000 by 2027
  • $25,000 by 2028
• Fundstrat’s Tom Lee called the new $7,500 target “possibly conservative.”

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Strategy (Michael Saylor) Signals More BTC Buys

• Strategy (formerly MicroStrategy) purchased another 155 BTC this week, bringing total holdings to 628,946 BTC ($74.2B+), with $28B+ in unrealized gains.
• Since Trump’s 2024 win, Strategy has added over 376K BTC in 9 months—more than it accumulated in the previous four years combined.
• Saylor reaffirmed focus on BTC: “The capital’s still flowing into Bitcoin.”

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Thailand Launches Crypto Tourist Payments

• Launching “TouristDigiPay” sandbox to allow tourists to convert crypto to Thai baht and pay via local e-money services.
• Requires KYC with regulated asset/e-money providers.
• Spending limits apply; no direct cash withdrawals allowed.
• Thailand welcomed 16.8M tourists in H1 2025 (–5% YoY), with a 34% drop from China.
• The program echoes crypto tourism efforts in Bhutan, UAE, and even Blue Origin’s space trips.

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Japan to Approve First Yen-Backed Stablecoins This Fall

• Japan’s Financial Services Agency (FSA) will approve JPYC, the country’s first yen-pegged stablecoin, by fall 2025.
• Issuer JPYC Inc. will register as a money transfer business, launching a fully fiat-backed digital asset.
• JPYC will be backed 1:1 by bank deposits and Japanese government bonds, with issuance via bank transfer to digital wallets.
• Officials expect stablecoin adoption to drive institutional demand for JGBs, mirroring how USDC and USDT use U.S. Treasurys.
• Observers warn countries slow to launch stablecoins may face higher bond yields due to missed demand.

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US Treasury Weighs Digital ID for DeFi Compliance

• Under the GENIUS Act, the U.S. Treasury is exploring digital identity tools to combat illicit finance in decentralized markets.
• A key proposal: embedding digital ID credentials into DeFi smart contracts for automatic KYC/AML checks.
• Treasury sees this as a way to lower compliance costs, improve privacy, and preempt financial crimes before execution.
• Public consultation runs through October 17, 2025, after which Treasury may issue guidance or propose new rules.
• Treasury emphasized balancing innovation and privacy, asking stakeholders for feedback on feasibility and safeguards.
  

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What We’re Watching Next Week

Aug 20: FOMC Minutes (July)

• Traders will scrutinize the Fed’s inflation language—especially references to tariffs, housing, and labor markets—for clues on the September rate decision.

Aug 21: Jackson Hole Symposium

• Fed Chair Powell’s keynote could reset market tone. A dovish lean would reopen the risk-on trade; a hawkish tilt may trigger short-term volatility.

Aug 21: US Jobless Claims & Manufacturing PMI

• Labor data and industrial sentiment could confirm (or contradict) the recent soft patch in retail and housing.