Market News by OnEquity

0.5% rate cut could create more stress for bitcoin, analysts warn

Contrary to what many analysts believe, the rate cut by the Federal Reserve could bring panic and concerns to the market, which would generate more caution in the market, generating disadvantages for Bitcoin and other assets that are considered as investments.

Everything seems to be ready for the U.S. Federal Reserve to start the long-awaited interest rate cut, so the attention of both enthusiasts and analysts will be focused on September 18, the day on which the members of the Federal Open Market Committee (FOMC) will make the determination for the U.S. economy.

Although many analysts agree that the measure could translate into something very positive for the markets in general, including cryptocurrencies, a report by CoinDesk anticipates that it could also generate and end up in another not so positive scenario, which would invite investors to be very cautious with the capital available for risky assets.

The flip side of the coin behind the potential rate cut
According to the report, the Fed is likely to start cutting interest rates on September 18, and although it is certain that the first cut will be made on that date, it remains to be seen how deep the reduction will be. Most of the readings indicate that it could be 0.25%, although others anticipate that, if heavy measures are needed, it could be 0.5% if the situation requires it.

Whatever the case, as opposed to the scenario that the measures applied on the economy are being relaxed, the reading regarding the rate cut could generate greater economic fears, because it is interpreted as an effort by the United States in its struggle not to be left behind against the economic slowdown and the risks of recession. Should this scenario gain more traction, investors may be much more cautious with the available cash, and focus on safer assets.

In analysis presented by CoinDesk, 10x Research firm founder Markus Thielen noted that “a 50 basis point cut by the Fed could signal deeper concerns for markets, the Fed’s primary focus will be on mitigating economic risks rather than managing market reactions.”

Against this reading, market trader Craig Shapiro ruled out that the Fed’s first cut will be 0.5%, as the idea is not to cause market panic. He believes the agency will implement the reduction gradually under the needs of the economy, looking for the best scenario for financial traders, but what risk assets require.

“We are back in this zone. Risk assets will correct until the Fed capitulates and gives you what you want. We need to find the strike price of the Fed put option, but given the current state of the economy and with risk asset prices (equities, credit spreads, etc.) still so elevated while economic data continues to grow slowly, I fear significantly lower levels,”Shapiro said.

Bitcoin still not rising
The analysts cited by CoinDesk’s analysts come amidst the Bitcoin’s decline over the past week, when it reached lows near USD $52,800 per unit.

The setbacks observed in the last seven days have been affected by fears of a possible economic recession in the US and the Federal Reserve’s obligation to implement certain measures to stimulate activity in the financial markets.

Added to this is the unknown of the U.S. presidential race, which pits former President and Republican candidate Donald Trump against Vice President and Democratic Representative Kamala Harris. Although the scenario seems very close at the moment, analysts believe that the cryptocurrency sector can tip the balance towards one of the contenders.

U.S. stocks fall after heated Harris-Trump debate; CPI data in focus

U.S. stocks fell on Wednesday as investors analyzed the outcome of a heated debate between U.S. presidential candidates Donald Trump and Kamala Harris and awaited the release of new U.S. inflation data, which could affect the Federal Reserve’s next monetary policy meeting decision.

The benchmarkS&P 500 index along with the tech-heavy NASDAQ Composite advanced last session, the first time the averages have posted two straight days of gains since mid-August.

However, the 30-stock Dow Jones Industrial Average retreated, and bank stocks fell just after JP Morgan Chase (JPM) indicated that analysts’ consensus estimates for its earnings next year were fairly optimistic. Earlier this week, Goldman Sachs CEO David Solomon also mentioned that the investment bank’s trading revenue would decline by 10% in the current quarter.

Trump-Harris debate yields few political details
The Republican candidate for the U.S. presidency, Donald Trump, and his opponent, Democrat Kamala Harris, engaged in a heated debate on Tuesday, in which different topics such as immigration and the economy were discussed.

Ahead of the much-anticipated debate, which came at a time when Trump and Harris are tied in national polls, investors were left with few details on how each candidate would address such momentous issues as tariffs, taxes and regulation.

During his time on the campaign trail, Trump has made promises to drastically cut corporate taxes and take a stronger stance on tariffs. Harris, by contrast, has promised to increase corporate taxes. Analysts have predicted that while Trump’s plan could serve to tax corporate profits, it could also fuel inflation. But they have also indicated that Harris’ proposal could instead undercut corporate profits.

On the debate stage, Harris questioned Trump’s policy of imposing high tariffs on goods from abroad, arguing that it would effectively tax the middle class. Trump defended it, claiming it would not mean higher prices for Americans, and lambasted Harris for having managed a period of high inflation during Biden’s tenure.

However, analysts at TD Cowen argued that this was “not a debate about economics.”

“There were no substantive discussions on key economic issues, including whether the White House should play a role in setting interest rates or how tariffs might affect inflation and economic growth,” the analysts noted in a note to clients.

Betting favored Harris right after the debate ended, with the odds of the acting vice president winning the vote rising to 56% from 53% before the event, according to data from online forecasting marketplace PredictIt cited by Reuters.

Inflation in focus
Markets are getting ready to analyze the latest U.S. consumer index, a key measure of inflation.

The figures come against a backdrop in which traders expect the Federal Reserve to cut borrowing costs from 5.25% to 5.5%, its highest level in almost 23 years, at its next two-day meeting on September 17-18. However, uncertainty surrounds the extent of the potential cut.

Pending inflation data, markets currently give a 67% chance of a quarter-point cut and a 33% chance of a half-point reduction, according to CME’s FedWatch tool.

Looking at month-on-month terms, overall U.S. consumer price growth in August is expected to be the same rate as July at 0.2%. On a year-on-year basis, the figure would decelerate to 2.5% from 2.9%.

So-called core consumer prices, which exclude the more volatile items such as food and gasoline, are at 0.2% m-o-m and 3.2% y-o-y, both in line with July.

Oil rises on supply concerns
Oil prices rose in European trading on Wednesday as traders waited to assess the impact of Hurricane Francine on production in the Gulf of Mexico.

Prices were also supported by industry data, which revealed an unexpected weekly drawdown in U.S. oil inventories.

However, oil markets rebounded from Tuesday’s heavy losses, when disappointing Chinese import data and a cut in demand forecasts from the Organization of the Petroleum Exporting Countries painted a bearish picture for oil markets.

SEC Raises $4.68 Billion from Cryptocurrencies Under 2024 Measures

The U.S. Securities and Exchange Commission has collected a significant $4.68 billion in fines from the cryptocurrency sector in 2024. This record marks an increase of approximately 3,018% compared to the fines collected in 2023.

The SEC states that through fines, it is ensuring transparency, protecting investors, and enforcing compliance across the cryptocurrency industry.

Terraform Labs Contributes to Crypto Fines
The $4.47 billion fine was levied after the collapse of Terraform’s algorithmic stablecoin, TerraUSD, which caused substantial losses for investors.

In June 2024, Terraform reached a settlement with the SEC, addressing allegations that the company had misled investors regarding the stability and security of its digital assets.

Despite bringing fewer enforcement actions, 11 in 2024 compared to 30 last year, the SEC has secured fines totaling more than 30 times the amount collected in 2023. This considerable increase, from $150.3 million last year to $4.68 billion this year, is the result of a more focused strategy on high-profile cases.

The SEC has also targeted companies such as Telegram and Ripple for unregistered token sales and securities violations.

“This trend indicates a strategic shift by the SEC toward fewer but larger fines, with a focus on making high-impact enforcement actions precedent-setting for the entire industry,” Social Capital Markets said.

Analyzing the data from 2019 to 2024, there is a clear increase in fine amounts. The average fine in 2018 was $3.39 million, which rose to an average of $426 million in 2024, representing an increase of 12,466.37%.

Fines to Discourage the Cryptocurrency Market
The fines imposed cover a wide range of financial penalties, including forfeiture, disgorgement, penalties, settlement amounts, and pre-judgment interest. These measures are part of the SEC’s comprehensive strategy to penalize and deter illegal activities in the market.

However, the SEC’s aggressive tactics have faced criticism. The crypto community has expressed concerns that such stringent regulations could stifle innovation by imposing measures that some see as overly punitive.

“The U.S. SEC/Gary Gensler is literally acting like ransomware thugs. They threaten so many crypto companies with bogus lawsuits and then settle for a big fine,” said one X user.

Additionally, the SEC’s handling of some cases has faced legal scrutiny. Notably, in a case against D.E.B.T. Box, a federal judge blasted the SEC for its “bad faith conduct” and ordered it to pay $1.8 million in legal fees. The judge also pointed to problems with the agency’s approach to compliance.

Dollar slips before Fed meeting; euro and pound advance

The U.S. dollar fell on Monday, while both the euro and the pound rose on expectations that the Federal Reserve will begin a cycle of rate cuts later this week.

Is a big Fed rate cut coming?
The U.S. Federal Reserve completes its latest policy meeting on Wednesday and is expected to begin cutting interest rates from very close to the 5.25%-5.5% range it has held for the past 14 months.

A rate cut has been widely indicated by Fed officials as the U.S. consumer price index declined last month to its lowest level not seen since February 2021. However, there is still some degree of uncertainty in the air regarding the size of the cut, and the U.S. currency fell sharply on Friday just after media reports served to once again fuel speculation related to the Fed potentially making a sharp interest rate cut by nearly 50 basis points.

According to CME FedWatch, Fed funds futures indicate a 59% chance of a 50 basis point cut during the September meeting.

U.S. Treasury yields have retreated again Monday during the anticipation of a cut, with benchmark 10-year yields down 30 basis points in about two weeks.

The Fed’s rate decision will be followed by a post-meeting press conference, where Fed Chairman Jerome Powell could give signals on future rate estimates and the economy at home.

Both the euro and the pound soar
In Europe, EUR/USD rose 0.4% to 1.115, with the single currency in demand despite the European Central Bank cutting interest rates by about 25 points for the second time the previous week.

European Central Bank President Christine Lagarde downgraded estimates of a further cut in funding costs next week, citing that the rate path was not predetermined and that the ECB would decide rates on a meeting-by-meeting basis, without making prior commitments.

ECB Chief Economist Philip Lane and Vice President Luis de Guindos will speak at separate events on Monday.

GBP/USD rose 0.4% to 1.3173 ahead of the latest ECB policy meeting scheduled for Thursday.

The UK central bank is expected to keep its policy rate at 5%, after starting its easing with a 25 basis point reduction during the August meeting.

Yen soars ahead of Bank of Japan meeting
The yen rose 0.8% against the dollar to 139.76, hitting more than eight-month highs, ahead of this week’s Bank of Japan meeting.

The BOJ’s interest rate decision next Friday is expected to hold its short-term target at 0.25%.

However, BOJ board members have signaled their desire to raise rates, possibly leading to the cancellation of more yen terminated carry trades.

USD/CNY traded flat at 7.0930, with regional trading volume moderated by public holidays in China, Japan and South Korea.

U.S. stock unchanged, with Fed meeting in focus; rate cut anticipated

U.S. stock index futures were little changed on Monday, as investors dug in ahead of this week’s Federal Reserve meeting, where there is a high likelihood that the Fed will begin a rate-cutting cycle.

Similarly, markets have been cautious after learning of a second attempted assassination attempt against the Republican presidential candidate, Donald Trump, fortunately the former president was unharmed.

Fed meeting approaching and markets appear to be divided on rate cut
The Federal Reserve is set to meet later this week and is expected to begin cutting interest rates, although market traders are currently divided over the size of the potential cut.

According to CME FedWatch, traders are currently pricing in a 50% chance of a 50 basis point cut and another 50% chance of a 25 basis point cut.

Wednesday’s decision is likely to signal the tone of the Fed’s plans to begin easing monetary policy at a time when it faces some concerns about the cooling economy along with the labor market. Although the latest economic data indicate that inflation is stable.

Likewise, lower rates are expected to support equities in the coming months.

Dow Jones and S&P hit all-time highs
Wall Street’s major indexes performed positively last week despite the inflation data, as technology stocks were supported and boosted by some big-ticket buying and resurgent buzz around artificial intelligence.

Broader stocks likewise rose, with bets on interest rate cuts spurring buying in sectors that are economically sensitive.

The S&P 500 rose 4% the previous week, while the. Dow Jones Industrial Average rose 2.6%, both indexes near all-time highs.

The NASDAQ Composite index rose by almost 6%, although it remained below the highs reached at the beginning of the year.

Pfizer gains after trial success
In the corporate sector, Pfizer (PFE) shares rose 0.6% before the markets opened, after the pharmaceutical company reported that its experimental drug to combat a disease that causes cancer patients to lose appetite and weight showed positive results in a mid-stage trial.

Boeing (BA) shares rose 0.3% before the markets opened, after falling more than 3% on Friday, as the 30,000-worker strike extended into its fourth day on Monday, and company and union negotiators are expected to resume labor contract talks on Tuesday.

Crude Oil Prices Rise Ahead of Fed Meeting
Crude oil prices rose on Monday ahead of this week’s expected Fed rate cut, although lingering demand concerns continued to limit any major hike. The US central bank is likely to begin an easing cycle on Wednesday, and lower rates bode well for economic growth, which in turn could help sustain US fuel demand in the coming months.

That said, Chinese economic data released over the weekend pointed to further economic weakness in the world’s largest oil importer, while Gulf of Mexico crude oil production resumed in the wake of Hurricane Francine, although nearly a fifth of crude production remained offline.

Market Highlights for the Week: Fed, Retailers, Earnings

This week will be critical for the markets, with the Federal Reserve’s interest rate decision, key data on retail sales and real estate, and earnings reports from companies such as FedEx and Lennar. The Bank of Japan will also unveil its monetary policy, adding an international component to the economic decisions that investors will be watching closely.

Fed Interest Rate Decision
The most important event of the week will be the Federal Reserve’s (Fed) interest rate decision. Policymakers have indicated that they will cut rates at their September meeting, which concludes Wednesday afternoon.

It is not yet known whether the cut will consist of a quarter percentage point or a half-point. Officials will also lay out updated economic and rate projections for the next few years.

The current rate is at an all-time high of 5.25% to 5.50%, and the Fed is expected to begin a series of cuts between now and the end of the year.

Retail Sales Data
This Tuesday, the Census Bureau will release August retail sales data. Sales are expected to be unchanged from the previous month.

In July, sales posted a healthy 1% growth. However, excluding autos, sales are expected to have increased 0.4%, in line with the growth seen in July.

Investors will be watching this data closely, as it provides insight into consumer behavior and the overall health of the economy.

Residential Construction Report
On Wednesday, the Census Bureau will also release August residential construction statistics.

A seasonally adjusted rate of 1.32 million private housing starts is expected, up nearly 100,000 from July. This data is critical to gauge the state of the housing market, a sector that has come under pressure due to rising mortgage rates, which have affected both buyers and sellers.

FedEx and Lennar Business Results
Corporate results will be another major theme of the week. On Thursday, results from FedEx and Lennar, two key companies in their respective industries, will be released.

FedEx (FDX) is a bellwether for the global trade and logistics sector, while Lennar (LEN) provides information on the housing market, which is vital in an environment of rising mortgage rates. These reports will provide further insight into how these industries are coping with the current economic circumstances.

Bank of Japan Monetary Policy
Finally, on Friday, the Bank of Japan will release its monetary policy decision. It is expected to leave its benchmark interest rate unchanged at 0.25%.

This event is of great interest to global markets, as the Japanese yen has shown considerable appreciation against the U.S. dollar in recent months, partly due to the expectation that the Fed will cut rates.

Dollar rebounds, euro hit by poor PMI data

The U.S. dollar rose on Monday, moving away from the one-year low recorded the previous week, while poor data on economic activity in the euro zone weighed on the euro.

Dollar on PCE watch
The U.S. dollar has somewhat recovered from the massive sell-off that followed the Federal Reserve’s sharp rate cut last week, and traders at this point seem to be dismissing the option of a U.S. economic recession right now.

“So far, investors have bought into the soft landing narrative offered by Chairman Jerome Powell last week,” ING analysts mentioned in a note. “And rather than the 50 basis point rate cut spooking equity markets, the major benchmark indices have continued to push higher.”

Mentioned this, futures traders at the. Fed right now are pricing in 75 basis points in rate cuts by the end of this year, and nearly close to 200 basis points in cuts by December 2025, according to CME FedWatch.

This week’s main economic data release on Friday is the Fed’s favorite indicator, core personal consumption expenditures.

Analysts are estimating a month-on-month rise of 0.2%, which would put the annual pace at 2.7%, while the overall index would slow to 2.3%.

“A core CPI of 0.1% on Friday could trigger another drop in U.S. rates and the dollar,” ING added.

Euro hit by PMI data
In Europe, the EUR/USD was down around 0.5% to 1.1111 after news that business activity in Germany contracted in September at its fastest pace in seven months, signaling that the largest economy on the European continent has entered recession.

Germany’s HCOB composite purchasing managers’ index by S&P Global fell to 47.2 from 48.4 in August, below the estimate of 48.2.

The European Central Bank cut rates for the second time in 2024 at the start of the month the week before, and further signs of economic weakness could increase the odds of another rate cut by October.

“This is not a good environment for the euro, nor for EUR/USD to break above the main resistance at 1.12. Further consolidation of EUR/USD in a range of 1.11-1.12 seems likely, with downside risks early this week,” ING mentioned.

GBP/USD fell nearly 0.4% to 1.3264, losing some of its recent gains after touching its highest level recorded since March 2022 the previous week.

The Bank of England kept its policy rate unchanged at 5% on Thursday after starting its easing with a 25 basis point cut in August.

“There is a sense that sterling’s long positioning is quite extreme,” ING said. “However, the latest CFTC data released last Friday covering activity through last Tuesday (Sept. 17) actually showed a fairly large reduction in long sterling positions by the speculative community.”

Yuan loses ground slightly after PBOC cut
USD/CNY rose 0.1% to 7.0595, with the yuan losing ground after the People’s Bank of China cut its 14-day repo rate to continue easing monetary conditions and be supportive of economic growth.

USD/JPY fell about 0.1% to 143.72 with moderate regional trading volume due to a holiday in the Japanese market, despite this, the yen remains near its strongest levels for 2024.

The Bank of Japan held interest rates steady the previous week and noted that it expects inflation and economic growth to rise steadily.

U.S. stock markets advance; more signals from the Fed awaited

Stock markets were trading slightly higher on Monday as investors took a breather at record levels in anticipation of further signals from the Federal Reserve this week.

The favoritism for interest rate cuts following the Fed’s unconscionable tapering caused both the S&P 500 and the Dow Jones Industrial Average to hit record highs the previous week. Although the NASDAQ Composite also rose, the most recent weakness in technology stocks kept the index below its all-time highs.

Fed and PCE inflation under discussion this week
A number of Fed officials and rate-setting committee members are scheduled to speak this week, most notably Chairman Jerome Powell, who will speak next Thursday.

The Fed also cut interest rates by 50 basis points last week, ushering in a new easing cycle that could signal a rate drop of as much as 125 basis points this year.

Although this move had served to propel Wall Street to record highs, overall gains were limited as the Fed maintained a less dovish estimate for the medium to long term.

The central bank indicated that neutral rates are likely to be much higher than in the past.

The pace of the easing cycle is also expected to depend largely on the U.S. economy.

The PCE price index, which is the Fed’s favorite inflation index, will be released next Friday and will give further signals on interest rates. Inflation continues to be well above the Fed’s annual target of 2%.

Ahead of this, investors will be paying close attention to economic activity data from the service and manufacturing sectors on Monday, while Republicans in the U.S. House of Representatives have put forward a new plan to keep the government funded for three months to avoid a shutdown.

Will Apollo make its investment in Intel?
In the corporate sector, Apollo Global Management has given the option to make a near $5 billion investment in troubled chipmaker Intel (INTC) according to Bloomberg.

The asset manager noted that it would be willing to make an equity-like investment in Intel, according to the Bloomberg report, and that the chipmaker’s senior management is mulling the offer.

Intel is facing a sharp decline in sales and has already outlined a series of cost-cutting measures, including plans to cut as many as 15,000 employees.

Oil rises on Middle East tensions
Crude oil prices rose on Monday, boosted by the possibility that escalating conflict in the Middle East could reduce regional supplies. Israel has launched a series of attacks in Gaza and Lebanon, and ongoing fighting has raised concerns that further fighting in the Middle East could disrupt supplies, straining global markets.

Crude oil prices have been recovering for the past two weeks from three-year lows, also driven by fears of increased supply in the aftermath of Hurricane Francine.

Market Highlights for the Week: Inflation, Gold, and the Fed

Key inflation data and speeches from several Federal Reserve policymakers will be closely monitored by investors following last week’s significant rate cut. PMI data will offer insights into the global economy’s strength, while gold prices remain near record highs. Here’s what to watch in the markets this week.

Inflation
The Federal Reserve’s preferred inflation gauge, due on Friday, will indicate whether price pressures have eased as the central bank starts to unwind its tightening monetary policy.

Economists estimate that the August Personal Consumption Expenditures (PCE) price index will rise by 2.5% year-over-year. The Federal Reserve’s latest economic projections estimate the annual rate of the price index will be 2.3% by the end of the year and 2.1% by 2025.

The week’s economic calendar also includes the final reading of second-quarter GDP, more reports on consumer confidence, durable goods orders, new and pending home sales, and weekly data on initial jobless claims.

Fed Speeches
Upcoming speeches by Fed officials will likely provide insights into last week’s rate cut. Atlanta Fed President Raphael Bostic will speak first on Monday, followed by Chicago Fed President Austan Goolsbee. Fed Governor Michelle Bowman will deliver a speech on Tuesday and another on Thursday, and given that she has become the first governor to disagree with a Fed decision since 2005, she is likely to make her case in her remarks, as she warned against cutting rates too quickly. Fed Chairman Jerome Powell will speak Thursday at the 10th annual U.S. Treasury Market Conference.

New York Fed President John Williams and Vice Chairman for Supervision Michael Barr will also speak at the same event. Investors will be watching for any clues on how the Fed is assessing progress in reducing its balance sheet.

Market Volatility
The S&P 500 index posted its first two-month high in two months at the close the previous week following the Fed’s announcement of a sizable 50 basis point rate cut, marking the start of the first U.S. monetary easing cycle since 2020.

The index has gained 0.8% in September, historically the weakest period for stocks, and is up 19% year-to-date. However, the market rally could face challenges if economic data fails to support the idea of a “soft landing,” where inflation moderates without harming growth. Additionally, the close presidential race between Donald Trump and Kamala Harris could add to market uncertainty, with polls showing a near tie.

PMI Data
PMI data, starting Monday, will offer the latest snapshot of the global economy. The Eurozone’s composite PMI has expanded for six months, and the UK’s for ten, strengthening the British pound. Markets seem convinced, for the time being, that the Fed’s half-point cut will help to avoid a recession in the United States and, consequently, a global recession.

However, some concerns remain. In Germany, the eurozone’s largest economy, the contraction in business activity deepened in August and confidence remains weak. Meanwhile, China’s economy continues to struggle, putting the world’s second largest economy at risk of missing its annual growth target of around 5%.

All-Time Highs in Gold
Gold bulls are driving bullion prices to new records, with a USD 3,000 per ounce milestone in sight, fueled by monetary easing from central banks and the approaching U.S. presidential election.

Spot gold touched an all-time high of USD 2,572.81 an ounce on Friday and is on course for its best annual performance since 2020, up more than 24%, thanks to safe-haven demand due to geopolitical and economic uncertainty and strong central bank buying.

Low rates typically benefit gold, which doesn’t generate interest income. Citi analysts noted last week that gold prices could hit $3,000 an ounce by mid-2025 and $2,600 by the end of 2024, driven by U.S. rate cuts, strong demand for exchange-traded funds, and ongoing physical demand.

The dollar stabilizes and the euro recovers positions

The U.S. dollar was able to stabilize on Tuesday, while the euro made attempts to recover from last session’s sharp losses.

Dollar Stable
The U.S. dollar stabilized after last week’s sell-off in the wake of the Federal Reserve’s rate cut.

The Fed began its rate-cutting cycle with a sizable 50 basis point reduction, and right now, attention is focused on the extent to which the central bank’s further rate cuts this year will be implemented.

According to CME Group’s FedWatch tool, which it always follows closely, traders are betting on a 53% chance that the Fed will again cut rates by half a point at its next scheduled meeting in November.

Markets are likely to pay close attention to Tuesday’s comments from Fed Governor Michelle Bowman, and for now, the lone dissenter on the magnitude of last week’s rate cuts.

Later today, this month’s Consumer Board consumer confidence will be released, although most attention is going to be focused on the release of the Fed’s favorite inflation gauge, core personal consumption expenditures next Friday, for more clues.

Euro recovers after losing ground
In Europe, EUR/USD rose 0.2% to 1.135, making efforts to recover after a near 0.5% drop overnight after data released Monday showed eurozone business activity contracted noticeably this month.

Germany, Europe’s largest economy, deepened its decline, while France, the second largest economy, returned to contraction.

The European Central Bank cut rates for the second time this year 2024 at the beginning of last week, and further signs of economic weakness may increase the likelihood of another rate cut in October.

GBP/USD traded virtually flat at 1.3347, not far from the 2 1/2-year high reached last week after the Bank of England kept rates unchanged.

“We do not see GBP/USD positioning particularly tense and, given the weaker dollar environment, the direction remains towards 1.35,” analysts at ING mentioned in a note.

Yuan gains ground on stimulus news
USD/CNY was down 0.2% at 7.0356 and settled at its lowest level on record since May 2023 after the Chinese government announced a stimulus package, reviving hopes of a revival in Asia’s largest economy.

USD/JPY advanced 0.6% to 144.51 after purchasing managers’ index data showed a continued decline in Japanese manufacturing activity, while the services sector continued to grow.

The Bank of Japan left interest rates unchanged the previous week and said it is confident that inflation and economic growth will rise steadily. AUD/USD fell 0.2% to 0.6825 after the Reserve Bank of Australia held interest rates as expected, while reiterating its decision to control persistent inflation.

U.S. Stocks Rise, Boeing and Bowman Speech in Spotlight

U.S. equity markets rose on Tuesday, tracking near all-time highs, in anticipation of further signals from the Federal Reserve regarding interest rates.

Wall Street indexes rose slightly on Monday, with the S&P 500 and the Dow Jones Industrial Average setting new record highs at the close.

Fed Speeches and PCE Data Anticipated
This week, attention is focused on several Federal Reserve officials’ speeches, particularly from Federal Reserve Chairman Jerome Powell, as markets seek further guidance on the central bank’s rate-cutting plans. Minneapolis Fed President Neel Kashkari indicated that the Fed might slow its pace of future rate cuts, while Atlanta Fed President Raphael Bostic stated that the economy is normalizing faster than expected. However, he dismissed the idea of rushing into further rate reductions.

Fed Governor Michelle Bowman’s speech at the Kentucky Bankers Association’s annual convention will also be closely watched, as she was the only dissenter on the size of the previous week’s rate cut. Last week, the Fed cut rates more than market estimates, signaling the start of an easing cycle that analysts believe could lead to a 125 basis point reduction by year-end. Investors are also awaiting Friday’s PCE price index release, which is expected to provide more clarity on inflation trends.

Boeing Offers Labor Agreement
In the corporate sector, Boeing has offered a more favorable labor agreement to its 30,000 striking employees in the U.S. Pacific Northwest. However, the union has stated that it will not put the proposal to a vote. Boeing’s latest offer includes a 30% wage increase over four years, along with improved retirement benefits and a larger ratification bonus if the workers accept the offer by Friday.

Deere & Company shares fell pre-market after former President Donald Trump threatened the company with a 200% tariff if it relocates part of its production to Mexico. AutoZone and KB Home are also set to release their quarterly earnings later in the day.

Chinese Stimulus Boosts Crude Oil Prices
Crude oil prices advanced on Tuesday, supported by monetary stimulus measures from major importer China and escalating tensions in the Middle East. Stimulus measures adopted by China fueled expectations of expanding demand for crude oil from the world’s largest importer.

On the other hand, the Israeli army announced that it had launched airstrikes against Hezbollah facilities in Lebanon on Monday, raising fears of a supply disruption from this oil-rich region and putting global markets on edge.

Interest Rate Cut Drives Cryptocurrency Investment to $321 Million

Cryptocurrency investment products saw inflows of up to $321 million in the previous week, an increase that is related to the Federal Reserve’s interest rate cuts.

Bitcoin, continues to be the dominant asset, drawing the most investment attention, while altcoins remain the most important cryptocurrency direction in the market.

Bitcoin at the Forefront of Cryptocurrency Investment Inflows
Digital asset investment products recorded another round of inflows, with Bitcoin leading the way, capturing $284 million. This increase also led to inflows from Bitcoin investment products intended for the short term. According to the latest CoinShares report, the Federal Reserve’s decision to cut interest rates by nearly 50 basis points last week played a vital role in driving these inflows. At the regional level, the U.S. led inflows, potentially contributing $277 million to the total value. This reaction to the Fed’s rate cut highlights the growing impact of monetary policy on crypto investments.

Ethereum, on the other hand, recorded its fifth straight week of outflows, totaling $28.5 million the previous week. CoinShares attributes this to Grayscale’s continued outflows along with the performance of Ethereum ETFs. Ethereum ETFs have struggled, with cumulative net outflows reaching $607.47 million. On September 20, the Grayscale Ethereum ETF (ETHE) reported $2.77 billion in cumulative net outflows, although other issuers, including the Grayscale ETH Mini ETF, notched positive flows.

In contrast, Bitcoin ETFs are registering strong demand, continuing to provide institutional-level investors with access to Bitcoin. According to Sosovalue data, cumulative net inflows reached $17.69 billion as of September 20, with all issuers reporting flows in the green, except for Grayscale’s GBTC, which reported about $20.07 billion in outflows.

Bitcoin Capital Rotation Heading to Altcoins
While Bitcoin continues to see increasing demand, the much-ballyhooed altcoin season continues to lag as capital has failed to flow to smaller market cap coins. Institutional investors and Wall Street players have played a significant role in driving demand for Bitcoin, particularly after the approval of Bitcoin ETFs earlier this year. As a result, Bitcoin has slowed the capital rotation into altcoins, putting the long-awaited altcoin rally on hold.

The anticipated “altseason” remains delayed. This phase is typically when investing in altcoins provides better returns than Ethereum or Bitcoin. According to the Altcoin Season Index, the market continues to be in a Bitcoin season, with a score of 33/100. This means that Bitcoin continues to dominate, even though altcoins are slowly gaining ground.

Dollar declines; euro approaches multi-month highs

The U.S. dollar weakened on Wednesday, adding to last session’s losses, and the euro benefited from signs of economic weakness in the eurozone.

The dollar continues to fall
The U.S. dollar has suffered for its friends after the Federal Reserve began its rate-cutting cycle with a sizable 50 basis point reduction earlier this month.

Data released Tuesday indicated that U.S. consumer confidence unexpectedly fell in September, raising concerns about further growth in the world’s largest economy, especially as the labor market shows signs of contraction.

“In a surprise move yesterday, U.S. consumer confidence was much weaker than expected,” mentioned analysts at ING, in a note. “The market is very sensitive to this issue, as the U.S. consumer has been so resilient for so long.”

Markets right now estimate the probability of a 50 basis point rate cut at the Fed’s next policy meeting in November at 59.5%, up from 37% a week ago, according to CME’s FedWatch tool.

Euro looks set to touch 13-month highs
In Europe, EUR/USD rose 0.1% to 1.1188 and neared 13-month highs achieved the previous month. The euro benefited from dollar weakness, even with data pointing to economic weakness in the eurozone.

“There is very little on the European calendar today, so EUR/USD is likely to move range-bound. But the fact that EUR/USD is holding above 1.1100 is encouraging for modest EUR/USD bulls like us,” added ING.

GBP/USD was down 0.1% at 1.3394, retreating from levels not seen since March 2022.

Sterling has been able to garner support as the Bank of England is thought unlikely to be as aggressive with its rate cuts this 2024 when compared to the Federal Reserve.

Yuan nears record highs
USD/CNY was down 0.1% to 7.0238, approaching its lowest level since May 2023, after Beijing reported a series of stimulus measures on Tuesday, including a cut in banks’ reserve requirements, as well as lowering mortgage rates.

USD/JPY rose to 143.81, while AUD/USD fell 0.2% to 0.6878, barely below a 19-month high after last session’s sharp rise.

Consumer price index data released on Wednesday revealed that inflation fell in August to a three-year low, although the decline in core inflation was less marked.

The Reserve Bank of Australia held interest rates steady on Tuesday and noted that while it expected inflation to fall in the near term, it only estimated that price pressures would steadily reach its target range in 2026.

U.S. Stock Markets Fall, Federal Reserve Spokespersons in Focus

U.S. stocks and indices fell slightly on Wednesday, consolidating after reaching record highs, with attention focused on upcoming signals from the Federal Reserve regarding interest rates.

The S&P 500 and the Dow Jones Industrial Average hit record highs on Tuesday, continuing the optimism triggered by the Fed’s interest rate cut the previous week.

Powell Speech and PCE Data in Focus
However, sentiment weakened after a Conference Board report revealed that U.S. consumer confidence unexpectedly fell in September due to concerns about the labor market.

Several Federal Reserve officials, most notably Chairman Jerome Powell on Thursday, are likely to provide further signals on the bank’s plans to cut interest rates.

Fed Governor Adriana Kugler will be in the spotlight on Wednesday.

On Tuesday, Fed Governor Michelle Bowman defended her decision to vote against a significant cut of about 50 basis points in interest rates, instead supporting a traditional quarter-percentage-point reduction, citing that key inflation readings remain uncomfortably above the Fed’s target level.

The Fed cut rates by 50 basis points the previous week and announced the start of an easing cycle, which analysts estimate could reduce rates by about 125 basis points this year.

Friday will bring data on the PCE price index, the Fed’s favorite inflation gauge, which will most likely influence the bank’s plans for interest rates.

Nvidia Cools Off After Strong Session
Shares of Nvidia (NVDA), the largest artificial intelligence company, were flat in premarket trading after rising more than 3% on Tuesday.

The stock was supported primarily by news that CEO Jensen Huang had completed the sale of more than $700 million worth of Nvidia shares under a trading plan.

Huang’s share sale may have dented confidence in the company, even more so after quarterly results failed to meet estimates and delays in its advanced artificial intelligence chips.

Crude Oil Falls
Crude oil prices fell on Wednesday as traders reassessed the effect of new monetary stimulus measures from major importer China. On Tuesday, both benchmarks were up just under 2% after China unveiled its new stimulus measures. However, traders have noted that more help may be needed to boost economic expectations in the world’s largest crude importer, Reuters reports.

The decline in U.S. crude stockpiles provided some support to the market, as data from the American Petroleum Institute indicated on Tuesday that crude inventories fell by 4.34 million barrels the previous week. Official figures from the Energy Information Administration will be released later this week.

SEC Delays Decision on Spot Ethereum ETF Trading Options

The U.S. Securities and Exchange Commission (SEC) has postponed its decision on approving a rule change to allow options trading in Ethereum exchange-traded funds. In a filing on Tuesday, the SEC announced it was extending the deadline for its decision on Nasdaq ISE’s proposal to list and trade options on the BlackRock iShares Ethereum Trust, also known as ETHA. The new deadlines are set for November 10 for Nasdaq ISE and November 11 for NYSE American LLC.

Both BlackRock and Nasdaq submitted filings on August 6, proposing rule modifications to list and trade options for ETHA. The proposal seeks to broaden investor access and provide a low-cost investment vehicle for exposure to Ethereum. Following Nasdaq’s filing, NYSE American submitted a proposal to list options for Ethereum ETFs managed by Grayscale and Bitwise.

On September 20, the SEC cleared options trading for BlackRock’s iShares Bitcoin Trust (IBIT) fund, a significant milestone for spot Bitcoin ETFs. According to Bloomberg ETF analyst Eric Balchunas, this clearance is a “big win” for Bitcoin ETFs, as it is expected to bring greater liquidity and attract more investors.

The SEC’s approval of U.S.-listed Bitcoin ETFs has led to increased demand for cryptocurrency investment products, driven by growing interest from both retail and institutional investors. The number of investment vehicles offering direct and indirect exposure to cryptocurrency assets continues to rise.

Recently, Grayscale expanded its cryptocurrency trust products to include assets such as Sui, Bittensor, Avalanche, and Ripple.

Dollar stabilizes before Powell’s speech and payrolls data

The U.S. dollar stabilized on Monday as market traders await Federal Reserve Chairman Jerome Powell’s speech later in the day ahead of Friday’s key jobs report.

Dollar on Payrolls Watch
The U.S. dollar lost ground the previous week after the Federal Reserve’s preferred inflation readings signaled that price pressures continue to ease, shortly after the Fed began its rate cut.

Fed Chairman Jerome Powell was scheduled to speak Monday to the National Association for Business Economics in Nashville, Tennessee, and is expected to elaborate on the Fed’s decision to cut its benchmark interest rate by half a percentage point earlier this month.

A survey by the group of forecasters released Sunday cited a monetary policy error as the biggest downside risk and danger to the U.S. economy over the next 12 months.

One relevant piece of data that could guide the pace of U.S. interest rate cuts comes Friday with the October nonfarm payrolls report, for which economists expect the U.S. economy to have added about 144,000 jobs.

“The Fed’s increased focus on the employment side of its mandate means high market sensitivity to the details of the release,” mentioned analysts at ING, in a note. “If we are correct with our forecast for a rise in unemployment, we estimate a weaker dollar as markets cling to expectations of a half-point Fed cut in November or December.”

Euro readies for inflation release.
In Europe, EUR/USD rose 0.1% to 1.1172, and was flat ahead of September inflation data due on Tuesday, which may be heavily relied upon by European Central Bank policymakers to determine whether to cut rates again in October.

The German inflation figures will be released ahead of those for the eurozone, and follow data from the previous week that indicated inflation in both France and Spain rose less than expected, raising expectations for an October rate cut by the ECB. “If we end the week with slower than expected eurozone inflation and somewhat weaker US payrolls numbers supporting a 50 basis point Fed cut, then expect the euro to be one of the laggards in an environment of dollar weakness as markets consolidate bets that the ECB will continue to cut in October,” ING mentioned.

“Another short-term move to 1.1200 is possible in EUR/USD on the back of USD weakness, but unless we see surprisingly strong Eurozone inflation, a big breakout to the upside may not be in the cards.”

Meanwhile, GBP/USD rose 0.2% to 1.3399, near the previous week’s high of 1.3430, and reached a level not seen since early 2022.

Data released on lines revealed that the U.K. economy grew more slowly than previously thought during the second quarter, as gross domestic product expanded by about 0.5% in the period from April through June.

The reading was slightly below the preliminary estimate of 0.6%, and came in below forecasts for another 0.6% increase.

Yen loses some of its gains
USD/JPY rose 0.2% to 142.44. The Japanese yen lost some of the previous week’s gains as the country’s new prime minister indicated that monetary policy should remain accommodative.

The yen surged on Friday as Shigeru Ishiba, a former defense minister and longtime critic of accommodative monetary policy, emerged as the leader of the ruling Liberal Democratic Party. Elsewhere, Japanese industrial production fell by 3.3% m-o-m in August, and housing starts fell by 5.1% y-o-y. USD/CNY rose to 7.0120, stabilizing after Beijing’s series of stimulus measures prompted a rally in the Chinese yuan the previous week to break below the psychological 7 per dollar barrier on Friday.

U.S. stock markets down slightly; Powell speech in spotlight

U.S. stocks declined on Monday, although September will turn out to be a positive month, as investors are looking for signals from Federal Reserve Chairman Jerome Powell regarding future interest rate cuts.

It is possible that the last trading day of the month will start on a slightly bearish note, although the Fed’s decision to cut interest rates by 50 basis points means that September is on track to be a positive month, even though it has been the most difficult month in history for the stock market.

The Dow Jones index has gained nearly 1.8% so far in September, ending Friday’s session at new all-time highs, and the S&P 500 index rose 1.6% while the tech-heavy Nasdaq advanced nearly 2.3% for the month.

Powell ready to talk
This optimism is based on the fact that investors expect the Federal Reserve to make another sharp 50 basis point interest rate cut at its next meeting due to easing price pressures coupled with weakening demand for labor.

With all of this in mind, traders focus their attention on comments on Powell’s estimates for the economy at the National Association for Business Economics annual meeting in Tennessee later in the session.

Additionally, the week ends with the release of the October nonfarm payrolls report next Friday and economists expect the U.S. economy to have added 144,000 jobs.

Investors are anxious to see whether the jobs data will support estimates of a soft landing scenario, in which the Fed can moderate inflation without significantly affecting growth, or revive fears of a possible recession.

Stellantis cuts its year-over-year forecast
On the corporate side, Carnival (CCL) will release its quarterly results on Monday, as the third quarter comes to a close.

On the other hand, shares of Stellantis (STLA) plunged more than 10% before the market opened after the auto giant, known for brands such as Dodge, Jeep and Chrysler, slashed its full-year guidance and announced it will spend more cash than it thought, citing worsening trends in the sector, higher costs to overhaul its U.S. business along with competition from electric vehicles in China.

Consumer Discretionary is the best performing sector in the S&P 500 in September, up 7.3% for the month.

It was followed by the utilities sector, up nearly 6%.

The financials, energy and healthcare sectors all declined this month.

Oil rises on escalating Israeli attacks
Oil prices rose on Monday on the prospect of conflict in the Middle East, as Israel stepped up its attacks on Iranian-backed Hezbollah and Houthi militant groups.

Israel claimed to have bombed Houthi targets in Yemen on Sunday, just days after killing Hezbollah leader Sayyed Hassan Nasrallah in an escalation of the conflict in Lebanon.

Oil prices fell last week on demand as fiscal stimulus from China, the world’s second largest economy and top oil importer, failed to calm market confidence.

Ripple obtains preliminary license to operate in Dubai

Ripple reported on October 1 that the blockchain company has achieved another regulatory milestone in the United Arab Emirates.

Specifically, the Dubai Financial Services Authority (DFSA) has granted Ripple preliminary approval, allowing the company to expand its services and strengthen its presence in the UAE and the Middle East in general.

The approval means Ripple can now provide its services elsewhere in the country, expanding its presence from the Dubai International Financial Centre (DIFC).

“This is a pivotal moment for Ripple’s operations in the Middle East. The DFSA is a world-renowned independent regulator with a rigorous regulatory process and we are delighted to have received its preliminary approval,” said Reece Merrick, Ripple’s managing director for the Middle East and Africa, in a statement.

According to Merrick, more than 20% of Ripple’s global user base is in the UAE, and the expansion will enable it to bring products and services to an increasing number of individuals and businesses. Among the key innovations will be Ripple’s cross-border payment solutions offering, including the Ripple Payments Direct, or RPD, service.

Ripple’s regulatory compliance
This achievement puts Ripple, the company behind the XRP cryptocurrency , on track to be the first blockchain-based payments provider to be licensed by the DFSA. The UAE is Ripple’s regional headquarters in the MENA region and South Asia, which the company founded in Dubai in 2020.

But in addition to regulatory compliance in the UAE, along with this new license in principle, Ripple has further traction in this pursuit.

The company has obtained more than 55 licenses in various jurisdictions around the world, including the New York Department of Financial Services (NYDFS), the Monetary Authority of Singapore (MAS) and the Central Bank of Ireland (CBI).

Dollar Benefits from Safe-Haven Status Amid Middle East Tensions

The U.S. dollar rose on Wednesday, benefiting from its safe-haven status and building on the strong gains from the previous session. This came after a missile attack by Iran on Israel, which further escalated tensions in the region.

Dollar Rises Amid Middle East Escalation
The turmoil in the Middle East intensified overnight, with Iran launching ballistic missiles at Israel in retaliation for the recent assassination of Iranian-backed Hezbollah leader Hassan Nasrallah and Israel’s ground deployment in Lebanon. Iran has reported that its attack is complete unless further provocations occur. However, Israel has promised a response, raising concerns that the United States, one of Israel’s closest allies, could become involved in the regional tensions.

“The escalation in the Middle East has led markets to price in an increased risk of a full-blown conflict in the region, which could involve the U.S.,” analysts at ING said in a note.

The dollar was also supported on Tuesday by better-than-expected U.S. job openings data, especially as markets await the official monthly jobs report due on Friday.

“Although ISM manufacturing data was softer than expected and prices paid fell below 50.0, the Fed is focused on the labor market. The surprising rebound in job openings for August contributes to a near-term bullish case for the dollar,” ING added.

The ADP nonfarm employment report for September is due to be released on Wednesday.

Euro Shows Signs of Stability
In Europe, the EUR/USD traded flat at 1.1067 after experiencing its largest drop in nearly four months on Tuesday. This drop came on further signs of cooling inflation in the eurozone.

The region’s inflation rate fell below the European Central Bank’s (ECB) target of 2.0% in September, and traders will closely watch comments from ECB officials, including Vice President Luis de Guindos and Chief Economist Philip Lane, for more guidance on the central bank’s monetary policy outlook.

Citigroup, in a note published Tuesday, reported that it now expects the ECB to cut interest rates by 25 basis points at its October 17 meeting, with additional cuts expected in December and through early 2025, bringing the policy rate to 1.5% by September 2025.

Meanwhile, GBP/USD was up 0.1% at 1.3293, still well below the previous week’s high of 1.3430, a level not seen since February 2022.

Yen Retreats Amid Interest Rate Uncertainty
USD/JPY rose 0.3% to 144.06 after Japan’s newly appointed Finance Minister, Ryosei Akazawa, said on Wednesday that Prime Minister Shigeru Ishiba expects the Bank of Japan (BOJ) to carefully assess the timing of raising interest rates again.

Minutes from the BOJ’s July meeting, released earlier this week, indicated that policymakers were divided on how quickly the central bank should proceed with further interest rate hikes.

Meanwhile, USD/CNY climbed to 7.0185, with the yuan remaining quiet as Chinese markets are closed for Golden Week, which runs until next Tuesday.