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JULY 24, 2023

SEC’S RIPPLE APPEAL

The U.S. Securities and Exchange Commission (SEC) has expanded its lawsuit against Terraform Labs and its CEO, Do Kwon, asserting that the recent Ripple ruling is flawed and can be appealed. The SEC intends to challenge the judgment, which concluded that Ripple did not violate the law when offering its token, XRP, to retail investors but did so with institutional investors. The central point of contention lies in the Howey test, a legal assessment used to determine if a financial instrument should be subject to SEC regulations. Terraform’s lawyers argue that the Ripple ruling supports their request to dismiss the lawsuit, while the SEC believes that the judge should overturn the findings regarding retail XRP sales. Meanwhile, Ripple’s general counsel, Stu Alderoty, anticipates that U.S. banks will once again use Ripple’s On-Demand Liquidity (ODL) product following the recent favorable decision by the courts.

SOFT LANDING UNCERTAINTY

The U.S. economy is cautiously optimistic about achieving a gradual slowdown, but this outcome hinges on the Federal Reserve’s willingness to tolerate higher levels of inflation. To control inflation and steer the economy towards its 2% target, the Federal Reserve is expected to make a slight increase in interest rates later this week without causing a recession, however, while some experts hold out hope that this week’s increase will be the last, others anticipate rates reaching 6%. This is because uncertainty looms over the future path, with questions surrounding the extent to which the Fed will accept inflation and for how long. In the absence of a recession, the job market could remain tight, which could result in elevated wages and companies raising prices to cope with increased labor costs, and the Fed may find itself pressured to further raise rates.

MARKETS’ MIXED REACTIONS

As investors brace themselves for the Federal Reserve’s crucial meeting on monetary policy and interest rates, the market is experiencing mixed reactions among bonds, gold, and other metals. U.S. Treasury yields have taken a downward trend, with the 10-year yield sliding over 3 basis points and the 2-year yield dipping more than 1 basis point. Meanwhile, gold prices have remained stable as anticipation builds around the central bank’s stance on interest rate hikes, with its outlook hinging on the potential for long-term price support from central bank buying. Moreover, spot silver has made slight gains, while platinum and palladium experienced minor drops. In the midst of these developments, experts highlight potential platinum under-supply due to autocatalyst substitution and reduced South African mine production.

POSSIBLE SWITCH IN HOME PRICES

According to recent data from the S&P Case-Shiller U.S. National Home Price Index, home prices have surged to a record high in May, maintaining the steady growth observed since 2012. This upswing has been driven by the fear of potential interest rate increases, prompting new buyers to enter the market in an attempt to secure lower rates before any further rise. However, Robert Shiller, an esteemed economics professor at Yale University, suggests that this positive trend may be coming to an end as the Federal Reserve puts an end to its rate-hiking cycle, nonetheless, he remarks that although there is a possibility of a soft landing in the housing market, challenges may lie ahead. Moreover, Shiller attributes part of the recent price surge to seasonal factors, noting that home prices typically rise during the summer.

KEY EVENTS HAPPENING THIS WEEK

Tuesday: Consumer confidence report for July, Fed’s meeting begins, and earnings reports for General Motors, Spotify (before market opens), Alphabet, Microsoft, and Snap (after market closes).

Wednesday: New home sales report for June, Fed Chairman Jerome Powell press conference, and earnings reports for Coca-Cola, Boeing, AT&T (before market opens), Meta and Chipotle (after market closes).

Thursday: Initial jobless claims report for week ending on July 22, GDP second quarter report, Pending home sales report for June, and earnings reports for McDonald’s, Comcast, Southwest Airlines (before market opens), Ford and Intel (after market closes).

Friday: PCE index report, Final consumer sentiment report for July, and earnings reports for Procter & Gamble (before market opens).

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