⚡️ Fed Rate Decision D Day! 2024: Brace for Market Mayhem!

Good Morning!

The Fed's decision day is upon us, and the market's split on whether we'll see a 25 or 50 basis point cut. Fund futures are leaning towards a bigger move, but analysts are playing it safe. With inflation cooling, a hefty cut might be needed just to keep real rates in check. Meanwhile, the dollar's stuck at 140.50 yen, and Chinese data's screaming for stimulus. It's an intense game of economic chess, and we're all watching the next move.

In today’s email:

• FedWatch: All eyes on interest rate decision this Wednesday

• Bitcoin: Bitcoin back below $59k prior to rate decision

• USDC: Coming to Soneium blockchain

• Gold: Futures above $2600 🚀

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THE BIG IDEA

Fed rate cuts poised to ripple through global markets, influencing currencies, bonds, and commodities

The Fed's impending rate cut isn't just a U.S. affair - it's set to send shockwaves through global markets. As we brace for the first cut in four years, the financial world is holding its breath, wondering if this is the start of a modest adjustment or a full-blown easing cycle.

The implications? They're far-reaching. For starters, it's music to the ears of other central banks itching to lower their own rates. The ECB and Bank of England might finally get the green light they've been waiting for, though they're still playing it cool on the inflation front.

In the bond market, yields are already doing the limbo, hitting their lowest points since late 2023. It's like déjà vu all over again, reminding us of when we first caught wind of the Fed's pivot.

For emerging markets, it's a mixed bag

On one hand, it's a chance to ease their own monetary policies and give their economies a boost. On the other, the looming U.S. election throws a wrench in the works, potentially leading to some unpredictable moves.

Now, don't get too excited about a weaker dollar just yet. History shows the greenback has a knack for rallying after initial Fed cuts. It's all about relative rates, and unless the dollar becomes the low-yield pariah of the currency world, it'll likely keep its allure.

In the equity playground, we might see the rally pick up steam again if lower rates juice economic activity without tipping us into recession. It's a delicate balance, but if we stick the landing, sectors like real estate and utilities could be the ones to watch.

Lastly, for you commodity buffs out there, keep an eye on metals. Gold's already shining at record highs, and base metals like copper could get a boost if we dodge a recession. Just remember, in the world of precious metals, it's often a game of "buy the rumor, sell the news."

Whether this is the start of a gentle glide or a roller coaster ride, one thing's for sure - the Fed's moves will be felt far beyond Wall Street.

MARKETS AT A GLANCE

TOP NEWS

Fed's rate cut certainty clouded by uncertainties in economic outlook and policy impacts

The Fed's imminent rate cut is a sure bet, but what follows is anyone's guess. Economic exceptionalism clashes with household pressures, while traditional policy anchors are adrift. Markets and the Fed are misaligned, with bonds signaling recession but credit markets betting on a soft landing. It's a high-stakes game of economic Jenga, where one wrong move could topple the whole stack.

Nvidia stock surges after recent dip, with key price levels to watch amid AI demand

Nvidia's stock rebounded 16% last week after a 23% dip, buoyed by Wall Street's optimism about AI growth. The stock's trading within a descending channel, recently approaching the upper trendline. Key levels to watch: $126 (potential breakout), $136 (near record close), and $166 (upside target). Support levels at $97 and $75. The rally's low volume suggests limited institutional involvement, adding uncertainty to the stock's trajectory.

Venture capitalists split between Trump and Harris, reflecting tech industry's political divide

Silicon Valley's VCs are publicly taking sides in the presidential race. Trump supporters cite concerns about overregulation and taxes, while Harris backers emphasize stability and diversity. The "VCs for Kamala" movement, with over 700 supporters, contrasts with high-profile Trump endorsements from figures like Musk and Thiel. The divide reflects broader tensions in tech over issues like antitrust, cryptocurrency, and innovation policy.

CRYPTO

Bitcoin and Ether plunge ahead of anticipated Fed rate cuts, while crypto ETFs see inflows

Bitcoin dropped 3% to below $58,400, with the broader crypto market down 5%. This comes despite recent ETF inflows and ahead of expected Fed rate cuts. Ether led losses at 5.5%, while some altcoins saw minor gains. The BTC/ETH ratio hit four-year lows amid growing competition in the blockchain space.

Circle partners with Sony to expand USDC on Soneium blockchain

Circle is collaborating with Sony Block Solutions Labs to integrate USDC on Soneium, Sony's new Ethereum layer-2 blockchain. The partnership aims to establish USDC as a primary token for value exchange on Soneium, potentially boosting Web3 creativity. This move aligns with Circle's mission to increase stablecoin adoption and Sony's vision for an interconnected digital ecosystem, marking a significant step in blockchain innovation.

Stablecoin issuers Paxos, Tether, Techteryx, and Circle have frozen nearly $5 million in stablecoins linked to the North Korean Lazarus Group after an investigation by blockchain sleuth ZachXBT

The group laundered over $200 million in crypto through 25 different exploits. Although the funds were frozen, ZachXBT criticized Circle for taking 4.5 months longer than other issuers to act. An additional $1.65 million was frozen at various exchanges, raising the total seized funds to $6.98 million. Some assets in the wallets remain unfrozen.

Crypto custody, currently a $300 million market, could see significant growth if Donald Trump wins the U.S. presidential election

The market is already expanding at a rate of 30% annually due to the high costs and risks of safeguarding crypto assets. Traditional Wall Street banks like BNY Mellon and State Street Corp. are beginning to enter the space, though regulatory hurdles, including SEC's rule SAB 121, remain a challenge. Trump’s stance on crypto regulation, which favors innovation over restriction, could accelerate industry growth.

GOLD

Gold futures surged past $2600 per troy ounce for the first time, closing at $2606.20 on September 14, 2024

This marks two consecutive days of record highs as investors eagerly await next week's Federal Reserve meeting, where a potential interest rate cut is anticipated. Fed Chairman Jerome Powell and other officials have signaled readiness for a rate reduction to support the economy. Market predictions vary, with expectations ranging from a 25 to 50 basis point cut, fueling gold's continued climb amid economic uncertainty.

DAILY ECONOMIC CALENDAR (ET)

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