Major cryptocurrencies opened August with choppy trading as renewed U.S. tariffs and a stronger dollar triggered volatility across global markets. Both Bitcoin (BTC) and Ether (ETH) briefly slipped before recovering, while the dollar index (DXY) surged to multi-month highs and the Japanese yen hit a four-month low ahead of Friday’s U.S. nonfarm payrolls report.

Price Action: BTC, ETH Stabilize After Intraday Dip

Bitcoin fell to a low of $114,290 early Friday, approaching a key bullish trendline extending from April and June lows, before rebounding to around $115,900. Ether mirrored BTC’s path, dropping to $3,616 before reclaiming $3,690 later in the session, according to CoinDesk data.

The downturn followed President Donald Trump’s announcement late Thursday of broad-based tariffs targeting countries with trade surpluses with the U.S. The move contributed to a sharp rally in the dollar and renewed fears of inflation, both of which tend to weigh on risk assets like crypto.

Macro Headwinds: Dollar Index Breaks 100 as Tariff Risk Returns

The U.S. Dollar Index (DXY) climbed above 100 for the first time since late May, extending a four-week rally fueled by expectations of stickier inflation. The index has gained over 3% in that span, tightening global financial conditions and prompting traders to scale back bets on riskier assets.

According to Robin Brooks, senior fellow at the Brookings Institution, the inflationary impact of tariffs—once thought to be delayed—is now materializing.

“At the root of the dollar’s rise is the realization that tariffs are finally lifting inflation,” Brooks said on X. “Inflation is coming… and markets are adjusting accordingly.”

Trump’s revised tariff plan maintains a 10% baseline tax on imports, rising to 15% for countries with large trade surpluses. Select Southeast Asian nations will face even steeper levies. Early data already shows these measures contributing to higher prices: June’s core Personal Consumption Expenditures (PCE) index rose 2.8% year-over-year—matching May’s reading and marking the highest level since February.

Rate Cut Odds Recede as Fed Holds Steady

The Federal Reserve left interest rates unchanged at 4.25% earlier this week, reinforcing its cautious stance. Hopes for a September rate cut have diminished sharply: the CME FedWatch Tool now shows just a 41% probability of easing next month, down from 58% a week ago and 75% in early July.

“Markets have clearly walked back rate-cut expectations,” said Matt Mena, crypto strategist at 21Shares. “Chair Powell’s call for ‘greater confidence’ in disinflation before acting is being taken seriously.”

Mena emphasized that Friday’s jobs data could significantly shift sentiment, especially if labor markets show signs of cooling.

Yen Drops to Four-Month Low as BOJ Stays Cautious

The Japanese yen weakened past 150.50 per dollar in Friday’s Tokyo session—its lowest since April—after Bank of Japan Governor Kazuo Ueda signaled hesitance toward near-term rate hikes. The move reflects broader global FX turbulence and adds to crypto’s near-term volatility mix.

Looking Ahead: Payrolls and Crypto Correlation

With BTC and ETH sensitive to macro liquidity conditions, Friday’s U.S. nonfarm payrolls report will be pivotal. A weaker-than-expected print could reignite Fed pivot hopes and provide tailwinds for digital assets.

“If labor data signals an economic slowdown, the Fed may gain room to ease,” Mena added. “In that scenario, Bitcoin could continue its march higher. $150K or even $200K remains within reach this cycle.”