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The exception is of course the crypto markets, which saw Bitcoin prices push beyond $108,000 yesterday. Bitcoin is now up over 50% following the election of Donald Trump and cryptocurrencies in general have experienced a wave of optimism since the 5th of November. The biggest factors behind the drive are investors piling into Bitcoin ETFs but perhaps more importantly the expectation that greater regulatory clarity will bring forward more actual adoption of the technology. Despite US-based companies practically begging for more transparent legal frameworks, the outgoing SEC administration utterly failed to deliver over the last few years. The new SEC chair appointee has yet to take up the mantle but has already drastically shifted sentiment in that regard. The total crypto market cap is now approaching $4 trillion, rivalling the largest US tech stocks. Speaking of which, Apple (AAPL), Amazon (AMZN) and Alphabet (GOOG) all established record highs this week, pushing the Nasdaq Composite to do the same on Monday. The rally has been firmly confined to the tech sector however. The Dow is currently in the midst of its worst losing streak since 1978 with nine consecutive daily closes in the red. Still some time to go before the Fed makes its decision. Most markets participants will have to wait until tomorrow to see any kind of reaction, if indeed there is any. FedWatch is now predicting a 25-bps cut with 96% certainty. Likewise, the Bank of Japan and Bank of England aren’t expected to produce any surprises tomorrow either, markets fully anticipating rates on the Yen and Sterling to remain at current levels.
The last week before Christmas is upon us. The New Year is just around the corner. Time is running short but Santa may have a few surprises in his sack before much of the world slows down for the holiday period. The Dollar took an unopposed step higher last week, traders seemingly unfazed by the Fed’s impending rate decision. Gold did not fare so well, opening the week strongly only to squander its momentum in the final stretch and end with a mere $15 weekly gain. As things stand there was very little enthusiasm this morning either. Bitcoin made a more decisive move on Sunday, reaching up to $104,000 and actually staying there for once. Judging by the movements earlier today, the move may still have some legs on it. Oil prices also saw some optimism, with Brent Crude aiming towards $74 and WTI climbing back above $70 a barrel. Much like the last, central banks dominate the economic calendar this week. The Federal Reserve is the one markets have all been waiting for and arrives late on Wednesday. A 25-bps rate cut is thoroughly priced in at this point, so expect any deviation from that on either side to have a significant impact. Thursday offers rate decisions from both the Bank of Japan and Bank of England. Neither are expected to budge from current target rates, but currency traders would do well to keep an eye out just in case. The other major event this week is the PCE price index on Friday, although given its publication straight after the Fed’s decision, it is likely to have less of an impact than it otherwise would.
The Swiss National Bank surprised markets yesterday with a 50-bps rate cut, bringing the target rate down to just 0.5%. The larger-than-expected adjustment weighed heavily on the Swiss Franc, pushing it down against the Dollar and the Euro, to $1.12 and €1.07 respectively. Over the last few years, the Swiss Franc has stubbornly appreciated against other major currencies but particularly against the Euro. The strength of the Franc has suppressed inflationary pressures locally and also negatively affected the Swiss export market. Monetary authorities in Switzerland have sought to mitigate these issues in recent times, with mixed results. The currency remains attractive due to safe-haven inflows and because interest rates on the Euro are expected to continue to decline further. The SNB still has a couple of tricks up its sleeve, including negative interest rates, which were used to great effect between 2014 and 2022, as well as the ability to deploy its huge balance sheet. The European Central Bank enacted a rate cut of its own yesterday, lowering rates on the Euro by quarter of a percentage point, to the surprise of no one. Nevertheless, the Euro continued its fall this week, now approaching $1.045. The Dollar is back on the front foot, pushing the DXY over 107, despite an all but certain incoming rate slash from the Fed next week. The fact is that most currencies are in a race to the bottom, interest rate wise, and the Dollar is falling slower than the rest.
Markets are quiet this morning ahead of the more substantive data releases later today. US inflation figures await us this afternoon, as well as the Bank of Canada’s latest interest rate decision. The target rate on the Canadian Dollar is currently 3.75% and the BoC is expected to lower this by another 50 bps. Cracks in the Canadian economy, particularly in the labour market, have prompted the central bank to lower rates four times already this year, putting a lot of pressure on the Loonie. USDCAD is now approaching $1.42, a 7% increase year-to-date. Of course, on the other side of the equation, we only have a week to go before the Fed’s next decision. Interest rate traders are now heavily pricing in a 25-bps cut but this could change if we see CPI figures significantly outside of expectations. Currency traders will also have to contend with the Swiss National Bank and European Central Bank on Thursday, both currently expected to enact 25-bps cuts of their own. Gold finally perked up this week. After a couple of weeks in the doldrums, bullion prices experienced some long-awaited buying pressure, challenging $2,700 an ounce yesterday. The buying came on behalf of the People’s Bank of China, which resumed its accumulation of gold after a six-month hiatus. Silver prices also rose, flirting with $32 an ounce over the last few days. Bitcoin experienced a minor pullback early this week, as did the wider crypto markets.
Non-Farm payroll data revealed few surprises last Friday, most figures falling largely within expectations. The publication ushered in a minor rally in the tech sector, which helped to push the S&P 500 and Nasdaq Composite to new record highs, while the Dow fell off the boil to close both the day and the week in the red. Gold traders must have been bored to death last week. The precious metal barely moved at all, remaining within the same $40 range before closing the week at $2,633 an ounce. The same could not be said for the crypto markets. Bitcoin finally hit six figures last week, blasting past $100,000 on Thursday during an extremely volatile trading session. The asset retraced soon after only to mount a second challenge this weekend. The battle for $100k rages on. The Dollar stabilised last week, allowing the DXY to reclaim 106 in the quietest week we have seen for currencies in a while. The peace may soon shatter once again however, as the Reserve Bank of Australia, the Bank of Canada, the European Central Bank and the Swiss National Bank are all set to chime in with interest rate decisions over the next three days. The Aussie Dollar is expected to remain at 4.35%, whereas the Loonie is facing a potential 0.5% cut and the Euro and Swiss Franc are looking at a 25bps reduction. Wednesday also delivers the latest round of US CPI data, which the Fed will no doubt pore over with a fine-tooth comb. Fed decision next week.
Strong rallies across the board earlier in the week but markets are now settling down in anticipation of Non-Farm Payrolls later today. The Dow, S&P 500 and Nasdaq Composite all hit record highs on Wednesday before drifting lower yesterday, tech stocks once again the primary drivers behind the surge. In a historical event, Bitcoin smashed through $100k in the early hours of Thursday morning. Unfortunately the rally did not sustain itself, with prices falling back below six figures less than 24 hours later. Crypto markets have enjoyed an almost continuous upswing since the US election and the jubilation continued this week following the news that president-elect Donald Trump has named Paul Atkins to lead the Securities and Exchange Commission, replacing outgoing incumbent Gary Gensler. The incoming SEC chair is vocally in favour of free-market principles and has a much more favourable view on cryptocurrencies, in stark contrast to Gensler. He is also a member of Token Alliance, a pro-crypto lobbying group. Despite the attention-grabbing headlines, focuses have already begun to shift away from Bitcoin and towards the larger crypto markets. Bitcoin dominance has fallen from highs of 61% down to 55% currently and many altcoins have started catching up on the action. Federal Reserve Chair Jerome Powell spoke on Wednesday afternoon, once again citing the strength of the US economy and progress on inflation as reasons to be cautious with regards to lowering rates. The next decision is just under two weeks away and markets are widely expecting a 25 bps cut. The Dollar settled lower yesterday, as did gold and crude oil. Attentions are now firmly focused on the NFP release later today. All hands on deck.
