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MAY 29, 2023

DEBT CEILING DEAL REACHED

President Joe Biden and House Speaker Kevin McCarthy have come to an agreement on a debt-ceiling deal, and they are confident that it will pass through Congress. The agreement sets federal spending until after the 2024 election and suspends the debt ceiling until January 1, 2025. Furthermore, democrats will cap federal spending for two years in exchange for Republican support. While the bill may not satisfy everyone, both Biden and McCarthy view the bipartisan compromise as a responsible approach to avoid a potential U.S. default. McCarthy expects a Republican majority to vote in favor of the bill, which will now move forward for voting in both chambers of Congress.

DEAL IMPACT ON CRYPTO MARKET

The recent agreement regarding the U.S. debt ceiling is believed to include a provision aimed at preventing certain taxes proposed by the Biden administration. One specific tax proposal under consideration is the Digital Asset Mining Energy (DAME) excise tax, which suggests a 30% tax on cryptocurrency mining firms. The purpose of this tax is to address the environmental and social impact caused by crypto mining. However, the absence of this tax in the “Fiscal Responsibility 5 Act of 2023” bill has caught the attention of industry groups and sparked speculation about the fate of the DAME excise tax.
Moreover, after the announcement of the debt ceiling deal, the cryptocurrency market saw a surge in investor sentiment, leading to Bitcoin and Ethereum values climbing to new highs. Nevertheless, Bitcoin swapped its upward trend as it has been trading slightly lower than its peak at just below $27,930.00, as of 8:00 am CST, while Ethereum has been holding steady above $1,900.00.

JOB UPDATES BRING RELIEF FOR THE FED

U.S. employers are slowing down their hiring rates, and hourly earnings growth has started to stabilize, which provides some relief to the Federal Reserve in its efforts to address high inflation. According to projections, the upcoming government data will show a decrease in the number of new job additions in May compared to the yearly average. Furthermore, earnings are also expected to rise at a slower rate. These updates on the job market coincide with the discussions to raise the U.S. debt ceiling, offering insight to the Fed on the impact of tighter credit conditions and economic concerns. The Fed is set to gather on June 13-14 to deliberate and make a decision regarding the potential implementation of another rate hike.

GOLD FALLS AND OIL REMAINS STABLE

Gold prices declined slightly on Monday due to reduced worries regarding the U.S. debt ceiling agreement, which led to decreased demand for safe-haven assets such as the precious metal. Meanwhile, oil prices remained stable as traders adopted a wait-and-watch approach to see if the tentative debt ceiling agreement would be passed.

KEY EVENTS HAPPENING THIS WEEK

Monday: Memorial day – all markets closed.

Tuesday: Consumer confidence report for May, and earnings report from HP (after market closes).

Wednesday:  Job openings and ADP employment reports for April and May, respectively, speech from Fed Governor Philip N. Jefferson regarding financial stability and the U.S. economy, and earnings reports from Salesforce, Nordsrom, Okta, CrowStrike and Chewy (after market closes).

Thursday: Initial jobless claims report, and earnings reports from Macy’s, Dollar General (before market opens), Lulelemon and Broadcom (after market closes).

Friday: U.S. employment report for May.

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