🚀 BoJ Halts Rate Hike, Bitcoin Soars! Is Higher on the Cards? 🚨

Good Morning!

BOJ wrapped up "central banker week" with a plot twist – no rate change, but a spotlight on the yen. Their statement was mercifully brief, peppered with "moderate" mentions. The kicker? A nod to financial and forex markets, hinting that a weaker yen might not be their cup of tea anymore. This nudged the yen up a tad, but it's still down for the week. Markets are now eyeing Ueda's presser for clues on potential tightening moves. Meanwhile, Asia's riding Wall Street's post-Fed high, and China's keeping us guessing with their rate stance.

In today’s email:

• BoJ: Kept rates steady at 0.25%, for now…

• Bitcoin: Bitcoin back to $64k amidst post Fed rate cut rally

• Consensys: Lawsuit against SEC dismissed by Texas judge

• Gold: Strong as a bull but some caution warranted at these levels

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THE BIG IDEA

BOJ holds rates steady but signals confidence in economic recovery, hinting at future hikes amid accelerating inflation and improving consumption

In a move that's got the financial world buzzing, the Bank of Japan (BOJ) is playing it cool on interest rates, keeping them steady at 0.25%. But don't let that fool you – they're painting a rosy picture of Japan's economic landscape, particularly when it comes to our shopping habits. They've upgraded their view on consumption, describing it as on a "moderate increasing trend." Translation? We're opening our wallets despite rising prices, and the BOJ's loving it.

This optimistic outlook is fueling speculation about when – not if – the next rate hike will drop. The yen's already perking up at the news, while the Nikkei's gains are slowing down as investors digest the implications.

But here's where it gets interesting:

While other central banks are hitting the brakes, Japan might be gearing up to step on the gas. Core inflation hit 2.8% in August, marking the fourth consecutive month of acceleration. It's like Japan's economy is finally shaking off its long economic slumber, with GDP growth at 2.9% in Q2 and real wages on the rise.

Of course, it's not all sunshine and sake. China's sluggish demand, a slowing U.S. economy, and the yen's recent strength are lurking in the shadows. And let's not forget the market jitters after July's rate hike.

So, what's next? All eyes are on BOJ Governor Ueda's press conference. If he keeps up the hawkish tone, we might be in for an exciting journey ahead. Most economists are betting on a December rate hike, but in this economic climate, anything's possible. Stay tuned – Japan's monetary policy just got a whole lot more interesting.

MARKETS AT A GLANCE

TOP NEWS

Fed's 2024 rate cut strategy mirrors 1995, potentially leading to economic boom and soaring stock market

The Fed's recent 50 basis point cut is drawing parallels to 1995's playbook. Back then, rate cuts sparked an economic boom and doubled the S&P 500. TS Lombard's Dario Perkins sees a similar scenario unfolding now, predicting a soft landing and manageable repercussions even if the Fed lags. Despite inflation concerns, market expectations remain steady, suggesting a potentially bullish outlook for the economy and stocks.

Oil market faces uncertainty as China's demand weakens, but a complete bust is unlikely

Oil prices are under pressure as China's economy sputters, with Goldman Sachs projecting potential drops to $60s or even $50 per barrel. However, experts caution against extreme bearishness, citing geopolitical risks. India emerges as a potential demand driver, but it's unlikely to match China's impact. While the market slows, a complete bust seems improbable, with the industry bracing for a period of stagnation rather than collapse.

Bank of England's cautious approach to rate cuts contrasts with the Fed, but may converge later in the year

The Bank of England's hesitant stance on rate cuts differs markedly from the Fed's recent moves. While the BoE promises a "gradual approach," hinting at quarterly 25bp cuts, underlying trends suggest this caution may be short-lived. Despite sticky wage growth and services inflation, signs point to a cooling job market and easing price pressures. Experts predict the BoE will accelerate cuts after November, potentially aligning more closely with the Fed's cycle by end-2025.

CRYPTO

Fed's surprise rate cut sparks risk-on rally across stocks, cryptos, and precious metals, with Bitcoin approaching $64k

The Fed's unexpected 50 basis point rate cut ignited a broad market rally. Stocks hit new highs, gold reached $2,584/oz, and Bitcoin surged to $63,903. Despite historical warnings that aggressive rate cuts often precede market downturns, traders are embracing risk assets. Analysts highlight $65,000 as a crucial level for Bitcoin, with potential for further gains if breached. The altcoin market also saw significant gains, reflecting the overall bullish sentiment across asset classes.

Appeals court grills CFTC and Kalshi over political prediction markets, with no clear indication of outcome

A federal appeals court heard arguments from the CFTC and prediction platform Kalshi regarding political betting markets. The CFTC claims these markets could harm democracy and are susceptible to manipulation, while Kalshi argues regulated markets are safer than unregulated alternatives. Judges pressed both sides on legal interpretations and potential impacts. The case has implications for crypto firms interested in prediction markets. No clear ruling emerged, leaving the future of U.S. political betting uncertain as the 2024 election approaches.

Texas federal judge dismissed Consensys' lawsuit against the SEC

The lawsuit had sought to declare that Ether is not a security and prevent SEC enforcement actions regarding its MetaMask wallet. The court ruled that the SEC's enforcement actions do not constitute final decisions and dismissed the case on procedural grounds. Consensys noted that the SEC dropped its investigation into Ethereum after the suit was filed. The firm plans to continue fighting the SEC’s claims about MetaMask acting as an unregistered broker.

Louisiana has introduced the option to pay state agencies using Bitcoin and USDC, starting with the Department of Wildlife and Fisheries

The state will convert crypto payments into US dollars at the time of transaction, ensuring financial stability. This initiative, supported by Bead Pay, aligns with Louisiana’s broader pro-crypto stance, following recent legislation banning CBDCs and safeguarding crypto-mining rights. The move demonstrates Louisiana's commitment to embracing digital financial technologies while maintaining regulatory oversight. Other state departments may adopt similar crypto payment options in the future.

GOLD

Gold has surged 54% over the past two years, driven by central bank purchases, geopolitical tensions, and the inflation-interest rate interplay

While it’s rising due to supply constraints and demand from diverse sectors like electronics, investors should be cautious. Historically, gold sees long periods of stagnation following spikes. The reduced opportunity cost of holding gold amid falling interest rates also supports its rise. However, its momentum-driven growth might be unsustainable, raising concerns about overvaluation. Gold can be volatile, requiring patience for long-term gains.

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