PRICE HIKES
In November, consumer prices increased at a faster rate, with an annual inflation rate of 2.7%. This rise was in line with expectations and signals ongoing concerns about inflation for households and policymakers. Moreover, excluding food and energy costs, core CPI stood at 3.3% annually. As of now, expectations remain optimistic that the Federal Reserve will lower the short-term borrowing rate by a quarter percentage point at their upcoming policy meeting to address the persistent inflation levels, which continue to exceed their 2% target. Furthermore, it is important to remark that while inflation has decreased from its mid-2022 high, some policymakers have expressed frustration with the inflation rate and have suggested that the pace of rate cuts may need to slow down if substantial progress is not achieved.
DEMAND SPIKED
Last week, there was a notable surge in the demand for mortgage refinancing as interest rates dropped for the third consecutive week. This drop in rates prompted many existing homeowners to seek potential savings through refinancing their mortgages. The Mortgage Bankers Association reported a 5.4% increase in total mortgage demand, primarily driven by a significant 27% rise in applications for refinancing compared to the previous week. Additionally, the average interest rate for 30-year fixed-rate mortgages decreased to 6.67%, marking a third consecutive weekly decline. Moreover, it is worth highlighting that while applications for purchasing homes did experience a slight decline of 4% for the week, they remained 4% above the levels seen a year ago.
CORRECTION LOOMING
Bitcoin is once again near the $100,000 mark, nevertheless, there are indications that a significant price correction of around 35% may be imminent as it has continued to approach key resistance levels against gold. Historical data shows that when the Bitcoin-to-Gold ratio reaches certain critical zones between 34 and 37, it often precedes market tops and subsequent downturns. Factors such as the overbought RSI and past instances where similar patterns led to substantial price declines highlight the vulnerability of Bitcoin to a sharp correction. Traders are observing these metrics closely, with a potential downside target of $65,000-69,000 by March 2025. However, a breakout above the current resistance level of $102,000 could signal a bullish rally towards $150,000, offering an alternative scenario.
NEW ALLIANCE
Circle and Binance, which are two major players in the cryptocurrency world, have set aside their past rivalries to collaborate on promoting USDC, a digital token tied to the U.S. dollar. This partnership comes at a pivotal moment as stablecoins are gaining traction in mainstream finance, challenging the dominance of Tether. Binance, previously a key player in the stablecoin market with its BUSD coin, faced regulatory scrutiny and pressure, leading to the winding down of BUSD in late 2023. Meanwhile, Circle, a staunch critic of Binance and Tether, has now agreed to work together with Binance following the latter’s settlement with the U.S. Justice Department. The alliance is seen as a strategic move to leverage Binance’s expansive network and Circle’s regulatory standing to drive the adoption and usage of USDC, bringing competition and innovation to the stablecoin market.
RISE DUE TO STIMULUS
Oil prices experienced a boost following China’s plans to improve its economy by adopting a more relaxed monetary policy. This move by China, which is a major oil importer, increased hopes for greater demand in the oil market. Additionally, it was reported that Chinese crude imports rose significantly in November after months of decline. On another front, the U.S. is considering imposing stricter sanctions on Russian oil, potentially complicating global trade relationships. These developments have led to fluctuations in oil prices, with market participants closely monitoring the situation. Furthermore, in the U.S., recent data showed an increase in both crude oil and fuel stocks, suggesting potential shifts in market dynamics.
