AWAITING FINAL DECISION
The major focus in the financial markets this week revolves around the pivotal decision of the Federal Reserve on whether to go with a 25 or 50-basis-point cut in interest rates during their upcoming meeting. Traders are grappling with this significant uncertainty, as the potential for a larger rate cut was initially dismissed last week. Analysts have highlighted the prevailing mood of indecision and unpredictability in the market regarding central bank intentions, and this has resulted in a fluctuation of bond yields, causing two-year U.S. bond yields to drop to their lowest level in two years. Thus, as the week unfolds, the overarching question remains: will the Fed opt for a modest rate cut or a more aggressive move, and how will this decision impact market dynamics and investor sentiment moving forward.
RATIO DROP
The current situation in the cryptocurrency market involves a significant decline in the ratio of ether (ETH) to bitcoin (BTC) prices, reaching its lowest level since April 2021. This drop indicates a reduced demand for ETH compared to BTC among investors. While the ratio had previously shown a positive trend, with ETH quadrupling in value relative to BTC, recent developments have led to a shift in preference towards BTC. Factors contributing to this shift include BTC reaching all-time highs in April while ETH has struggled to surpass its 2021 peak, as well as the rise of Bitcoin ETFs and the promise of higher yields on alternative blockchains. It is worth remarking that this decline in the ETH/BTC ratio is expected to continue, potentially falling further in the range of 0.02-0.03. Moreover, investors are currently exercising caution and seeking more clarity on future monetary policies and regulations before considering higher-risk investments in altcoins.
BILLION DOLLAR PURCHASE
Despite Bitcoin currently trading lower, MicroStrategy recently made a substantial investment in the cryptocurrency, acquiring approximately $1.1 billion worth of the BTC. This purchase marks the company’s largest since February 2021 and brings its total Bitcoin holdings to 244,800 BTC, valued at around $14.14 billion. To finance this acquisition, MicroStrategy sold over 8 million shares of its stock. Moreover, it is worth remarking that the intelligence firm expressed its bullish outlook on Bitcoin, predicting that it could reach as high as $13 million over the next 21 years due to increasing global interest, and this move has proven to be profitable for them, as their average acquisition cost per Bitcoin of $38,585 resulted in a substantial gain. Furthermore, the announcement of this latest purchase has triggered a surge in MicroStrategy’s stock price, as it rose by 8.18%.
SHARP DECLINE
Gas prices have seen a significant drop of over 35% since July 2022, reaching a national average above $5 per gallon. This decline is attributed to global crude markets struggling due to low industrial demand and disagreements among OPEC members. The fall in crude prices, resulting from concerns about global growth and high U.S. oil production, has led to a decrease in gasoline prices. In addition, the recent impact of Hurricane Francine near New Orleans has also affected oil and gas production in the Gulf region, which contributes to around 39% of U.S. oil and gas production. Moreover, OPEC’s decision to delay output increases and Saudi Arabia’s subsequent cut in selling prices have further affected oil prices. Additionally, the International Energy Agency’s lowering of growth forecasts, influenced by weak demand in China, suggests that global oil demand may plateau by the end of the decade. These changes have contributed to lower inflation levels and will likely remain a key issue in the upcoming election cycle, as discussed in a recent debate between Vice President Kamala Harris and former President Donald Trump.
KEY EVENTS HAPPENING THIS WEEK
Monday: Empire State manufacturing survey report for September.
Tuesday: Business inventories report for July, U.S. retail sales, industrial production and capacity utilization reports for August and home builder confidence index report for September.
Wednesday: Housing starts and building permits reports for August, FOMC interest-rate decision and Fed Chair Powell press conference.
Thursday: Existing home sales and U.S. leading economic indicators reports for August, Philadelphia Fed manufacturing survey report for September, and initial jobless claims for week ending on September 14.
