Fed cut bets propel stocks and oil higher as crypto risks simmer; dollar on watch
Risk appetite firmed after softer U.S. data pushed market-implied odds of a Federal Reserve rate cut up to roughly 85%, lifting equity and energy futures even as fresh warnings on Tether’s reserves and Bitcoin volatility kept crypto traders on edge.
Rate-cut odds jump on weak U.S. data
Cooling consumer spending and slower hiring reinforced the picture of a U.S. economy losing momentum, prompting traders to price in a higher likelihood of near-term policy easing. A dovish shift typically supports duration and risk assets, while putting the U.S. dollar under pressure as yield differentials narrow. Liquidity dynamics also remain in focus, with some desks flagging a lag in Treasury General Account (TGA) outflows as a swing factor for short-term funding conditions.
Futures rally into year-end horizon
S&P 500 December 2025 futures settled up 25.20 points, extending a tentative risk-on tone. Crude benchmarks advanced across the curve, with long-dated contracts pacing gains as demand optimism improved alongside signs of tighter balances. The move accompanies a broader pickup in risk sentiment as investors rotate toward cyclicals and energy on the back of falling U.S. growth fears and policy support hopes.
Energy macro: power prices climb, Mediterranean gas hopes build
– U.S. electricity prices are rising by more than 10% amid an AI-driven data center buildout and new policy mandates, according to industry chatter, with solar additions offering only a partial offset. The trend raises questions about downstream margins for power-intensive industries and the potential stickiness of core services inflation.
– Cyprus and Lebanon signed a maritime agreement that unlocks gas exploration in the Eastern Mediterranean. The deal could accelerate appraisal activity, with ExxonMobil reportedly eyeing new prospects, marginally improving regional supply prospects and medium-term LNG optionality for Europe.
Crypto watch: USDT stability under scrutiny, Bitcoin volatility elevated
S&P Global cut its view on Tether’s USDT to “weak,” highlighting a roughly 5.6% Bitcoin exposure within reserves and flagging transparency and coverage risks. The agency’s concern: a sharp BTC drawdown could stress the stablecoin’s peg if reserve buffers prove insufficient. Tether defended the stability of its roughly $180 billion token, saying holdings are conservatively managed.
Bitcoin rebounded toward $90,000 after a recent wobble, with traders focusing on Fed signaling and liquidity dynamics. The $80,000 zone remains a key support area watched by systematic and options-driven flows.
FX implications
A higher probability of Fed easing tends to compress rate differentials, a headwind for the dollar and supportive for higher-beta FX such as commodity-linked and select EM currencies. Rising crude and power prices can bolster petro-FX and terms of trade for energy exporters, while the Eastern Med gas story adds a new, albeit slow-moving, supply thread for Europe. Crypto-linked volatility is unlikely to spill over meaningfully into G10 FX in the near term, but broader risk sentiment could be sensitive to any stablecoin stress headlines.
Key points
- Markets price about an 85% chance of a Fed rate cut after soft U.S. consumption and hiring data.
- S&P 500 Dec ’25 futures rose 25.20 points; crude oil futures advanced across the curve.
- U.S. power prices are up more than 10% as AI data center demand and mandates strain grids; solar growth only partly offsets.
- Cyprus–Lebanon maritime accord opens new Eastern Med gas exploration; ExxonMobil interest underscores supply potential.
- S&P Global downgraded Tether’s USDT to “weak,” citing Bitcoin exposure and reserve transparency concerns.
- Bitcoin bounced toward $90,000; $80,000 flagged as key support amid liquidity and policy watch.
- FX focus: softer U.S. rates backdrop questions dollar resilience; energy and gas developments support commodity FX narratives.
What to watch next
– Upcoming U.S. inflation and labor prints for confirmation of a dovish Fed trajectory.
– Oil inventory data and OPEC+ commentary for validation of crude’s upswing.
– European energy policy signals as Eastern Med exploration ramps.
– Stablecoin reserve disclosures and on-chain flows after S&P’s USDT assessment.
FAQ
How do weaker U.S. data affect the dollar?
Softer growth typically boosts Fed rate-cut expectations, narrowing yield differentials with peers. That can pressure the dollar, particularly against higher-beta and carry-sensitive currencies, though the magnitude depends on incoming inflation data and risk sentiment.
Why does S&P’s USDT downgrade matter for markets?
USDT is a major source of crypto liquidity. Concerns about reserve composition and Bitcoin exposure raise tail risks around peg stability during sharp drawdowns. Any stress could amplify crypto volatility, though direct spillovers to G10 FX remain limited absent broader risk-off waves.
What does the Cyprus–Lebanon maritime deal mean for energy prices?
It clears a legal path for gas exploration in the Eastern Mediterranean, potentially expanding regional supply over time. Near-term price effects are modest—discoveries, appraisal, and infrastructure take years—but it adds diversification potential for Europe’s gas mix.
Could rising U.S. electricity prices complicate the Fed’s job?
Higher power costs can feed into services and industrial inputs, risking stickier inflation. If offset by efficiency gains and renewable buildout, the impact may be contained. The Fed will weigh these pressures against slowing demand when calibrating cuts.
What levels are crypto traders watching now?
Bitcoin’s bounce toward $90,000 keeps focus on the $80,000 support zone. A decisive break below could trigger mechanical selling from systematic strategies; holding above keeps dip-buying intact, especially if Fed rhetoric remains market-friendly.
This article was produced by BPayNews.
