🏦 FOMC Shocker! What to Expect from Today's Meeting?

Good Morning!

The dollar's flexing its muscles today, backed by surging Treasury yields and fresh inflation jitters from robust US data. While we're looking at a cautious Fed potentially cutting rates by just 37.5 bps through 2025, the ECB's expected to slash rates by a whopping 99 bps this year. That policy gap is putting serious pressure on the euro, which is hovering near two-year lows after a rough 6% tumble in 2024.

In today’s email:

• FedWatch: All eyes on FOMC meeting today

• Bitcoin: Whacked down to $95K!

• Ethereum: Researcher predicts price surge to $12K 

• Gold: RBC sees moderate gains in 2025

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THE BIG IDEA

Fed's December meeting minutes could reveal hawkish undertones after strong ISM data challenges rate cut expectations, putting market optimism to the test

Just when Wall Street thought it had the Fed figured out, the plot thickens. December's FOMC minutes are about to drop, and they might not be the dovish bedtime story markets were hoping for. Here's why this matters: Despite the Fed penciling in roughly 150 basis points of cuts through 2025, recent economic data is telling a different story – one that's making traders increasingly nervous.

The latest ISM services report landed like an unexpected plot twist, showing the sector isn't just alive and kicking, but actually accelerating. More importantly, service prices are climbing at their fastest clip since February 2023. That's not exactly the kind of news that screams "rate cuts incoming."

Let's rewind to December's Fed meeting

Powell and team already scaled back their ambitious rate-cutting plans, halving the expected 2025 cuts to just 50 basis points. But here's the kicker – they might have actually been too cautious, given how the economy keeps throwing curveballs. The Fed's been playing catch-up, first appearing too dovish when the economy heated up, then possibly overcorrecting on the hawkish side just as things seemed to cool.

Markets are clearly feeling the pressure. Treasury yields are climbing, the dollar's gaining strength, and stocks are taking a hit. With the Fed emphasizing the importance of looking past short-term data volatility, these minutes could reinforce a more hawkish stance than many investors bargained for. Wall Street might need to brace for more turbulence ahead.

MARKETS AT A GLANCE

TOP NEWS

Chinese investors are rapidly exhausting expanded quotas for overseas investment vehicles as they seek refuge from struggling domestic markets

China's investment landscape is shifting dramatically. Local investors are stampeding into global bond funds so quickly that five major funds just hit pause on new subscriptions – even after regulators boosted mainland ownership caps to 80%. With Chinese stocks stumbling and local bond yields at record lows, investors are desperately hunting for greener pastures abroad.

Anthropic aims to secure a massive $2B funding round at a $60B valuation, highlighting the intensifying AI race among tech giants

Looks like the AI gold rush isn't slowing down. Anthropic, the AI powerhouse behind Claude, is about to add another $2B to its war chest at an eye-popping $60B valuation. With $875M in annual revenue and Lightspeed leading the charge, they're giving OpenAI a run for its money. Amazon's already bet $8B on them, and Google's thrown in $2B.

Quantum computing stocks face sharp selloff after Nvidia CEO suggests practical quantum computers are likely 15-30 years away

The quantum computing bubble just got a reality check from tech heavyweight Jensen Huang. While these stocks have been on an absolute tear – with Quantum Computing up a mind-boggling 1,800% – Nvidia's CEO just suggested we're decades away from "very useful" quantum computers. IonQ, Rigetti, and others tumbled over 14% after hours.

CRYPTO

Bitcoin falls below $98K and drags crypto market lower as strong US economic data dampens Fed rate cut hopes, triggering mass liquidations

The crypto party hit a speed bump as Bitcoin slipped under $98K, triggered by unexpectedly robust US economic data. Two key reports – JOLTS job openings and ISM Services – came in hot, sending bond yields surging and rate cut hopes crashing. The fallout? A brutal $300M in liquidated long positions and altcoins taking an even bigger hit than BTC.

Derive researcher predicts ETH could surge to $12K in 2025, citing potential Trump presidency, Pectra upgrade, and institutional adoption as key catalysts

Watch out Bitcoin – Ethereum's getting some seriously bullish predictions. Derive's head researcher sees ETH potentially hitting $12K this year, powered by the upcoming Pectra upgrade and a possible crypto-friendly Trump administration. With 250% more calls than puts in options markets and long-term holders up to 75%, the smart money seems to be betting big on ETH.

Judge Grants Coinbase Appeal, Pauses SEC Lawsuit

In a rare move, Judge Katherine Polk Failla approved Coinbase’s interlocutory appeal, pausing the SEC lawsuit alleging Coinbase operated as an unregistered exchange. The case now goes to the Second Circuit Court, which will likely address the critical legal question of how the Howey Test applies to crypto-assets.

Vitalik Buterin Advocates Decentralized Defense for AI Risks

Vitalik Buterin champions "d/acc," a decentralized defense philosophy prioritizing community-driven technologies over centralized control. Since its 2024 debut, d/acc has driven advancements like open-source vaccines and virus-detecting air testers. Vitalik envisions decentralized funding models ensuring tech safeguards against AI risks while empowering individuals and communities.

GOLD

RBC: Gold Set for Moderate Gains in 2025 Amid Economic Uncertainty

RBC Capital Markets predicts gold will post modest gains in 2025, driven by inflation risks, geopolitical tensions, and economic uncertainties. Despite elevated interest rates and a strong US dollar pressuring bullion, RBC forecasts average prices rising to $2,823 per ounce, bolstered by central bank demand and investor caution over Trump's trade policies and global sovereign debt.

DAILY ECONOMIC CALENDAR (ET)

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