🚨 Fed's Move: September Rate Cut Incoming? Bitcoin Tumbles!

Good Morning!

The Bank of England's in the hot seat today, with markets betting on a rate cut from its 16-year high. The Fed's hinting at a September easing, and the BOJ's already made its move. European shares are playing it cool, but Asian markets are riding high on tech euphoria. The yen's flexing its muscles, sending the Nikkei into a tailspin. Meanwhile, China's manufacturing sector's shrinking faster than my patience for crypto winters. All eyes on Apple and Amazon's earnings later – will they keep the tech party going?

In today’s email:

• Fed Watch: Keeps rates steady, September cut awaited

• Bitcoin: Bitcoin back below $65k mark

• Bitwise: CIO believes we’re not bullish enough!

• Gold: Eyeing new record highs

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THE BIG IDEA

Fed signals potential September rate cut as inflation cools, balancing economic progress with political sensitivities

Fed Chair Jerome Powell has opened the door for a potential interest rate cut as early as September, signaling a potential end to the central bank's two-year battle against inflation. The Fed held rates steady at 5.25%-5.50%, but softened its stance on inflation risks, suggesting a pivot towards easing monetary policy.

Powell emphasized that rate decisions would be data-driven, not politically motivated, despite the September meeting's proximity to the U.S. elections. He noted "quality" disinflation across the economy and hinted that if economic data evolves as expected, support for cutting rates will grow.

The Fed's statement acknowledged progress towards its 2% inflation target and highlighted a low unemployment rate

This optimistic outlook aligns with investors' expectations of a "soft landing" scenario, where inflation is tamed without significant economic damage.

Markets reacted strongly to Powell's comments, with interest rate futures, stocks, and Treasury bonds rallying. Investors now see a September rate cut as highly likely, with some even speculating on a larger 50-basis-point reduction.

The shift in the Fed's language, removing phrases like "highly attentive to inflation risks" and acknowledging risks to both sides of its dual mandate, further supports the idea that the inflation battle is nearing its end.

As the Fed navigates this transition, it must balance economic progress with political sensitivities, maintaining its data-driven approach while preparing for potential rate cuts that could significantly impact the economy and financial markets in the lead-up to the U.S. elections.

MARKETS AT A GLANCE

TOP NEWS

Bill Ackman's Pershing Square US fund IPO collapses amid lowered targets and investor withdrawal

Bill Ackman, the hedge fund heavyweight, just pulled the plug on his Pershing Square USA IPO. What was once touted as the next Berkshire Hathaway has now fizzled faster than a meme coin pump. From a lofty $25bn target to a measly $2bn, this IPO dream crashed harder than my portfolio during the last bear market. Even a key investor, Baupost Group, backed out faster than you can say "FOMO." Looks like Ackman's social media fame couldn't save this financial flop.

Investors grapple with Fed's ability to achieve a 'soft landing' as rate cuts loom

The Fed's eyeing a September rate cut, but the economic runway's getting tight. Powell's confidence is rising, but so are investor jitters. Some fear we've kept rates sky-high for too long, risking a hard landing. Others worry cutting too soon could reignite inflation's flames. The job market's still robust, but cracks are showing. Friday's employment data could be a game-changer. The big question: Can the Fed stick this economic landing, or are we in for a bumpy ride? Either way, the market's already priced in quite a party.

Citigroup repeatedly violated a key Fed rule limiting intercompany transactions, leading to liquidity reporting errors

Looks like Citi's been playing fast and loose with the Fed's rulebook. The banking giant repeatedly broke Regulation W, a rule designed to keep banks from getting too cozy with their affiliates. This slip-up led to some funky liquidity reporting, adding to Citi's growing list of regulatory headaches. The bank's already under the microscope for its risk management practices, and this latest revelation could turn up the heat. Citi claims they're committed to compliance, but with regulators already breathing down their neck, they might need more than just good intentions to stay out of trouble.

CRYPTO

Bitcoin and other cryptocurrencies tumble amid Middle East tensions, despite broader market gains following the Fed meeting

Crypto's taking a nosedive while the rest of the market parties. Bitcoin slipped below $65K as Iran reportedly ordered retaliation against Israel, ramping up Middle East tensions. The Fed's steady hand on rates couldn't save digital assets from the geopolitical jitters. Interestingly, traditional markets are singing a different tune - stocks are soaring, gold's shining, and oil's surging. Some experts reckon it's all about pre-Fed positioning. Long-term, though, the crypto outlook remains bullish, with potential Fed rate cuts and growing political focus on crypto policies.

Ethereum ETFs could reach $10B in assets under management within a year, potentially driving ETH price to $6,000

Sygnum Bank's crystal ball is showing some serious potential for Ethereum ETFs. They're predicting these new funds could rake in up to $10 billion in their first year, following Bitcoin ETFs' lead. While Ethereum's lesser name recognition might slow adoption, its smart contract prowess could be a major draw for traditional investors. The market's currently bearish on ETH ETF inflows, but any positive surprises could send Ether's price skyrocketing. We're already seeing signs of life, with the new ETFs reversing outflow trends. Could $6,000 ETH be on the horizon? Only time – and investor appetite – will tell.

Crypto execs warn SEC likely still views SOL and other tokens as securities despite recent filing changes

Don't pop the champagne just yet, Solana fans. Crypto legal eagles are warning that the SEC's recent move to drop its request for a court ruling on SOL's security status doesn't mean it's off the hook. The regulator's likely playing 4D chess here, potentially shifting its strategy based on different judges' leanings. Remember, the SEC's still calling these tokens securities in other lawsuits. This legal dance affects a whopping $100 billion worth of crypto, including big names like BNB, Cardano, and Polygon. The crypto world's watching closely, but for now, it seems the security debate is far from settled.

Bitwise CIO believes the market is underestimating Bitcoin's potential amid growing political endorsements

The Bitcoin2024 conference in Nashville has Matt Hougan, Bitwise CIO, thinking the crypto market isn't bullish enough. Why? Political endorsements for Bitcoin are hitting unprecedented levels. We're talking GOP nominee Trump planning a national Bitcoin stockpile, senators pushing for massive government Bitcoin purchases, and even Democrats warming up to crypto. It's a far cry from the FTX collapse days. Hougan suggests this political love fest isn't just altruism - it's a response to crypto's growing popularity among Americans. With over 80 million U.S. crypto owners, politicians are taking notice. The result? Scenarios once deemed far-fetched, like a G20 country adding Bitcoin to its balance sheet, now seem plausible. Time to rethink Bitcoin's upside potential?

GOLD

Gold surges to $2,451, eyeing new record highs with potential targets at $2,480 and $2,566

Gold's shining brighter than ever! It's just hit a dazzling $2,451, smashing through the $2,432 resistance like a hot knife through butter. This bullish breakout's got the gold bugs buzzing, with their sights set on even loftier heights. We're talking potential targets of $2,480 and a sky-high $2,566. The yellow metal's flexing its muscles on both daily and monthly charts, showing some serious upward momentum. If it closes above $2,445 today, we're looking at the third-highest daily close in history. With the Fed hinting at rate cuts and geopolitical tensions simmering, gold's safe-haven appeal is looking more lustrous than ever. Time to polish those golden dreams?

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