PRICES INCREASED

As stated by the U.S. Department of Commerse, inflation remained high in March, with prices continuing to increase. This is because the PCE price index, which is a key measure monitored by the Federal Reserve, rose 2.8% from a year ago excluding food and energy, exceeding expectations. Energy costs, as well as services prices rose, with the latter  increasing by 4% over the year. Meanwhile, goods remained stable ane food prices slightly declined. Overall, including food and energy, prices increased by 2.7%. Nevertheless, it is worth highlighting that despite this rise, consumers continued to spend, with personal spending and income on the rise. Moreover, following the realease of this data, investors await a response from the Fed to get insights of their next move, with many believing that rates will likely stay unchanged at the upcoming meeting happening of May 1.

RISING DESPITE OUTFLOWS

Current market data revealed a daily net outflow of $217 million from U.S.-listed Bitcoin exchange-traded funds (ETFs), totaling $244.49 million for the week. Of particular interest is the outflow from Grayscale’s Bitcoin ETF, which has seen $417 million exit this week. In addition, liquidation data, as reported by GoinGlass, shows $60 million in total asset sales over the past 24 hours, with Bitcoin accounting for $13.48 million. Furthermore, $6.17 million in long positions were liquidated against roughly $7 million in shorts. Nevertheless, despite the significant outflows from Bitcoin ETFs, the value of the crypto the overall value of Bitcoin has continued to rise, and as of 8:00 AM CST, the crypto is still trading at above $64,000. Recent reports from JPMorgan suggest a weakening correlation between Bitcoin ETF prices and fund inflows, dropping from 0.84 in January to 0.60, which suggests a decrease in the alignment between Bitcoin prices and ETF movements, thus, Bitcoin’s value will likely continue resilient even if outflows from ETFs continue happening.

POSSIBLE SURGE AHEAD

Following the release of the latest U.S. inflation, some investors are getting ready for a possible increase in the 10-year U.S. Treasury yield due to the belief that rate cuts are not likely to be happening any time soon. Let’s remark that the fear that inflation might not be quickly controlled, makes it harder for the Federal Reserve to lower interest rates without causing more price increases for consumers. This uncertainty has been going for the last few months, as a result, the yield on the 10-year Treasury note has gone up by 80 basis points this year, now standing at 4.70%, which is the highest in five months. In addition, in terms of how expectations are standing right now, futures markets predict that the Fed may only cut interest rates by 35 basis points this year, far less than initially expected. Furthermore, many investors believe that bonds will continue to weaken, with some hedge funds betting against Treasuries, expecting yields to go even higher.

SUCCESS DUE TO AI

The recent realease of the earnings reports from Microsoft and Google highlight their progress in the fields of artificial intelligence (AI) and cloud computing, driving significant revenue growth for both tech giants. Alphabet and Microsoft surpassed Wall Street expectations, with a substantial uptick in cloud revenue fueled in part by the growing use of AI services. And due to these positive results, the companies saw their stock prices surge, with Alphabet up by 12% and Microsoft up by 4%. There has been a fierce competition for dominance in AI between these two companies, with Microsoft partnering with OpenAI to challenge Google’s longstanding dominance in internet search. However, the results of the quarter indicate ample room for growth for both parties.

INTERNATIONAL NEWS

The Bank of Japan’s decision to maintain current interest rates and update its bond-buying policy caused a significant drop in the yen’s value, leading to market unease. Despite keeping rates steady as expected and not signaling a decrease in bond purchases, the central bank’s higher inflation forecasts and commitment to rate hikes under specific conditions were overshadowed by the yen weakening beyond the 156 mark against the dollar, prompting caution from Finance Minister Shunichi Suzuki. Governor Kazuo Ueda downplayed the currency’s impact on inflation but witnessed a sudden strengthening of the yen later in the day. Financial experts noted the nervousness in the market as the yen continued to fall to new record lows, with speculation that the central bank governor may intervene to support the currency. Chief Economist Masaaki Kanno highlighted the Bank of Japan’s inaction in addressing the weak yen, leaving the finance ministry to tackle the issue independently and raising concerns about the currency’s value and market stability moving forward.