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MARCH 18, 2024

BOUNCE BACK

Despite dropping to lows of $64,500 over the weekend, BTC rebounded above $68,000, indicating investors’ confidence in buying the dip. This was in response to market concerns regarding the FOMC’s impact on macroeconomic conditions, which have also influenced BTC as recent data showing inflation and potential interest rate hikes could affect risk assets. Furthermore, meme coins surged in popularity over the weekend, boosting the sector’s market cap above $55 billion, with notable gains seen in tokens like SHIB, DogWifHat WIF, and CORGIAI. Notably, Solana (SOL) and Avalanche (AVAX) also experienced notable increases in value. Solana emerged as a popular asset with new meme tokens continuously emerging, and smart contract platform indixes, particularly SCPXX, saw an 8.2% increase, outperforming the CD20 index measuring major digital assets.

SENTIMENT TOWARDS HIKES

As data continues to show persistent inflation, investors who previously anticipated interest rate cuts by the Federal Reserve this week are now facing the reality of higher rates. For instance, bond traders, once confident in rate cuts, now see slim odds of action in the near future and are adjusting their strategies accordingly. This is because the interest-rate swaps market now predicts less than three rate cuts this year, which is a significant decrease from earlier projections of around six cuts. Additionally, Options traders are also showing caution in response to stronger-than-expected producer price data as they are buying protective options linked to the Secured Overnight Financing Rate, which tracks the central bank policy rate. This rush to purchase protective options suggests a shift towards a more hawkish stance among traders, anticipating potential interest rate increases and reflecting concerns about inflationary pressures and a less dovish monetary policy outlook. Moreover, as for the upcoming Fed’s meeting, there are concerns that the Fed may signal a shallower easing cycle.

AI WOODSTOCK SPARKS EXCIMENT

Nvidia’s highly anticipated annual artificial intelligence conference begins today, earning the nickname “AI Woodstock” from industry analysts. CEO Jensen Huang is scheduled to deliver a keynote address in the afternoon, setting the stage for an exciting lineup of new products and the unveiling of the company’s latest technological vision. With expectations running high for the semiconductor giant, investors are closely watching Nvidia’s performance at the event. Despite last week’s market volatility, Nvidia’s shares remained resilient, marking their 10th consecutive week of gains. This milestone represents the longest winning streak in Nvidia’s history as a public company, reinforcing investor confidence in the company’s growth prospects and technological prowess. Moreover, as the conference unfolds and Huang articulates his strategic vision for the future of AI and technology, stakeholders are eagerly anticipating the innovative advancements and strategic initiatives that could further propel Nvidia’s stock momentum.

INTERNATIONAL NEWS

The pound has recently reached a 17-year high due to the increased optimism among investors, with hedge funds feeling bullish. The pound has been performing well so far this year, climbing nearly 1% in March and currently trading above $1.27. Nonetheless, it is important to remark that this positive trend may be at risk if the Bank of England decides to lower interest rates, following the actions of other central banks. Asset managers warn that any adverse changes in inflation or employment data could lead to a decrease in the pound’s value. Thus, any signs of easing price pressures in the UK data may result in selling. Moreover, as for current market predictions, they suggest a rate cut could happen by August, and if the BOE does go ahead with this dovish approach, the pound may test support levels near $1.26.

KEY EVENTS HAPPENING THIS WEEK

MONDAY: Home builder confidence index report for February.

TUESDAY: Housing starts and building permits report for February.

WEDNESDAY: FOMC interest-rate decision and speech from Fed Chair Powell following the decision.

THURSDAY: U.S. leading economic indicators and existing home sales report for February, initial jobless claims for the week ending on March 15, Philadelphia Fed manufacturing survey, S&P flash U.S. services PMI and S&P flash U.S. manufacturing PMI reports for March, and speech from Fed Vice Chair for Supervision Michael Barr.

FRIDAY: Fed listens event, and speeches from Fed Vice Chair for Supervision Michael Barr and Atlanta Fed President Raphael Bostic.

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