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SEPTEMBER 25, 2023

CRYPTO PRICES PLUNGED

Bitcoin and other cryptocurrencies have witnessed a drop in prices as risk-sensitive assets slumped. Bitcoin specifically fell to below $26,100, getting closer to the significant support level of $26,000 that has provided stability for over a month. Furthermore, the cryptocurrency market also experienced low trading volumes and volatility, indicating decreased investor interest. Traders are now anticipating the Securities and Exchange Commission’s decision on Bitcoin exchange-traded funds, but it may take some time for this to happen. Moreover, it is important to note that Bitcoin’s movements are closely tied to macroeconomic factors, such as the major indexes in the stock market. Therefore, the outlook for interest rates, especially in the current high-interest rate environment, will greatly influence Bitcoin’s trajectory.

CONFLICTING FORECAST

The Federal Reserve’s recent announcement about interest rates has once again caused a difference in views between policymakers and financial markets. Although the Fed recently hinted that interest rates will increase by the end of the year and that inflation will gradually decrease, interest rate futures contracts suggest the opposite. This disparity can be attributed to several factors, including the market’s optimism regarding decreasing inflation, concerns about slower economic growth and job creation, and uncertainty regarding the accuracy of the Fed’s own forecasts. Whether the market’s predictions will prove accurate remains to be seen, but this ongoing difference of opinion highlights the challenges the Fed faces in managing inflation and aligning policy decisions with market expectations.

CLIMB CONTINUES

Amidst supply constraints and speculation-driven bets, oil prices are steadily climbing, causing West Texas Intermediate (WTI) futures to surge by up to 0.9% and surpassing the significant $90 per barrel threshold. This upward trend is primarily driven by hedge funds envisioning limited supplies and supported by OPEC+ countries, including dominant players like Saudi Arabia and Russia, implementing production cuts. Moreover, the optimistic economic projections in both the U.S. and China add fuel to the fire, propelling prices even higher. As evidence of tightening supply, Russia has temporarily banned fuel exports, while U.S. crude stockpiles continue a gradual decline. Looking ahead, China’s upcoming holiday is expected to further boost demand for jet fuel, aligning with an anticipated surge in air travel. All these factors considered, industry experts perceive this environment as a favorable opportunity for investors, with the chances of a significant price decline appearing remote.

INTERNATIONAL NEWS

The German government is currently experiencing its highest borrowing costs in 12 years due to a decline in business confidence and an increase in interest rates. According to a survey by the Ifo institute, business morale in the largest economy in Europe has worsened for the fifth consecutive month. The president of Ifo, Clemens Fuest, stated that the German economy is “stagnating” as the business climate index dropped slightly from 85.8 to 85.7. This decline comes as companies adapt to record interest rates, which were raised to 4% by the European Central Bank last week. As a result, the yield on 10-year German government bonds has risen to its highest level since 2011, reaching 2.79%. Market expectations indicate that rates will remain elevated for an extended period. Moreover, Carsten Brzeski, the global head of macro at ING, mentioned that German businesses, politicians, and the overall economy are slowly adjusting to the notion of prolonged sluggish growth.

KEY EVENTS HAPPENING THIS WEEK

Monday: 3-Month and 6-Month Bill auctions.

Tuesday: New home sales report for August, Consumer confidence report for September, and speech from Fed Governor Bowman.

Wednesday: Mortgage bankers association (MBA) reports, and Durable-goods orders and durable-goods minus transportation reports for August.

Thursday: Initial jobless claims report for week ending on September 23, GDP second quarter report (revision), and speeches from Fed Chairman Powell and Fed Governor Cook.

Friday: PCE index, Advanced U.S. trade balance in goods, retail inventories and wholesale inventories reports for August, and final Consumer sentiment report for September.

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