September is ending on shaky ground. Central banks dominated last week’s narrative, with the Fed delivering a 25 bp cut to 4.00–4.25% – framed by Powell as a “risk management cut” aimed at cushioning softer labor momentum while guarding against reigniting inflation. The dot plot pointed to two more reductions this year and another in 2026, signaling that policymakers see scope for further easing, but only at a measured pace. The message was clear: the Fed is willing to cut, yet it will proceed carefully, keeping flexibility to respond to incoming data rather than committing to a rapid cycle.
Equities ripped to fresh highs last week as under-positioned investors scrambled to add risk, but crypto failed to keep pace and has since rolled over. The sell-off at the start of the week saw over USD1.7bn in liquidations amid thin liquidity, knocking BTC back below USD110,000 and ETH sub USD4,000. Positioning has stayed light into quarter-end, leaving markets cautious ahead of today’s Core PCE release, the final macro test of September.
The September jobs report is now behind us. Payroll growth softened while participation held steady, giving the Fed just enough cover to remain cautious. Markets still price two more 25 bp cuts by year-end, but the sequencing will be dictated by the next big data points, with labor remaining front and center in the Fed’s reaction function.
Elsewhere, the USD found support after Q2 GDP was revised higher to 3.8%, with the DXY finishing the week up 1%, though the broader downtrend still points weaker into Q4. The SNB held rates at 0% and reiterated its readiness to intervene in FX markets, while projecting inflation at 0.2% in 2025, 0.5% in 2026, and 0.7% in 2027. On the geopolitical front, Russia has stepped up grey-zone tactics in Europe, with drone incursions near airports in Denmark and Poland prompting NATO consultations. The Ukraine front remains tense, keeping a layer of risk premium embedded in markets – another factor contributing to the fragile tone as September closes out.
Crypto: Flush, Flows and Fragile Conviction
Crypto price action has been heavy into month-end. As of writing, BTC is trading belowUSD109,000 and ETH sub USD3,900. The leverage flush earlier this week cleared out weaker hands, a healthy reset in our view. While the sell-off has been sharp, BTC dominance has ticked back up to 59%, consolidating after weeks of downtrend. On ETF flows, after powering August’s rally with strong inflows, momentum has flipped sharply. This week has seen sustained outflows – with BTC spot ETFs –USD720m and ETH ETFs –USD547m so far. Conviction remains intact in our view, but short-term price action is being dictated by skittish flows.
Looking Ahead: October Tailwinds or More Chop?
Today’s Core PCE is the last major macro input for September. Headline and core PCE are expected at 0.3% and 0.2% respectively, setting the tone for near-term rate expectations.
For crypto, this week’s pullback looks more like healthy consolidation than breakdown. With September’s jobs data behind us and weaker hands flushed out, the market feels reset – laying the groundwork for the next leg higher, even as the broader risk backdrop stays fragile. October seasonality has often provided a tailwind for BTC, yet whether that plays out this year will hinge on flows returning and the Fed’s room to ease. Until then, ranges may stay choppy, but the structural pillars of liquidity, fiscal dominance, and institutional adoption are still firmly in place – setting up an important inflection into Q4.
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