🏦 Powell's Speech: Will Risk Assets Crash 📉 or Skyrocket 📈?

Good Morning!

The yen surged 0.5% as BOJ's Ueda hinted at possible rate hikes if economic and inflation forecasts hold. Japan's core inflation hit 2.7% in July, supporting his stance. Markets are now pricing a 70% chance of a December rate move. Meanwhile, global stocks dipped as tech shares retreated, with all eyes on Powell's upcoming Jackson Hole address. The Fed's recent "slow and methodical" approach comments have slightly dampened expectations of a hefty September rate cut.

In today’s email:

• FedWatch: Powell speaks today at Jackson Hole

• Bitcoin: Bitcoin still around $61k mark. Further pain coming?

• Commodities: Have had some big winners and losers this year

• USDD: ‘DeFi 101’ or UST?

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THE BIG IDEA

Fed Chair Jerome Powell's upcoming speech at Jackson Hole is generating buzz, but don't expect any bombshells

With markets already pricing in a September rate cut, Powell's task is to confirm expectations while providing a broader economic overview.

The Fed's July meeting minutes revealed a "vast majority" of policymakers favor a September cut, barring surprises. Philadelphia Fed President Patrick Harker reinforced this, stating the need to "start a process of moving rates down" next month.

Powell's speech, scheduled for 10 a.m. EDT Friday, will likely focus on reassessing monetary policy effectiveness. He's expected to review the Fed's inflation fight progress and acknowledge potential economic headwinds, particularly in the labor market.

The central question remains:

Will it be a quarter-point or half-point cut? Markets currently lean towards a quarter-point, with a 25% chance of a larger move. The decision will hinge on incoming economic data, especially the upcoming nonfarm payrolls report.

Analysts anticipate a dovish tone from Powell, reflecting moderating inflation and a softening labor market. He'll likely provide a broad outline for the approaching easing cycle without offering detailed forward guidance.

The Fed's pivot comes as the economy reaches an inflection point. Powell may address lingering questions about post-pandemic economic dynamics, including potential shifts in inflation persistence and labor market trends.

As the Fed transitions back to its dual mandate of price stability and maximum employment, Powell's challenge is to navigate this delicate balance while maintaining market confidence. His words will be closely scrutinized for clues about the pace and extent of future rate cuts, with markets currently expecting significant easing through 2024 and into 2025.

MARKETS AT A GLANCE

TOP NEWS

BOJ Governor Ueda signals readiness for rate hikes if economic and inflation forecasts hold, despite market volatility

Ueda's not backing down from potential rate hikes. He's keeping a watchful eye on market jitters, but if inflation stays on target, rates are going up. Japan's short-term rates are still in the basement, and Ueda's hinting they'll climb to "neutral" if the economy plays ball. The yen perked up on this news, but don't expect a quick move. The BOJ's playing the long game, balancing market stability with their inflation goals. December's looking more likely than October for the next rate shake-up.

Investors pour nearly $90bn into US money market funds, anticipating higher yields as Fed prepares to cut rates

The money's flooding into US money market funds faster than you can say "rate cut." A whopping $88.2bn poured in during the first half of August, with big-time institutional investors leading the charge. Why? They're betting on these funds to keep serving up juicy yields even after the Fed trims rates. It's a savvy move – while Treasury yields might dip post-cut, money market funds can potentially keep the party going longer thanks to their diverse holdings. But don't expect this gravy train to last forever – if rates dip below 3%, investors might start eyeing greener pastures.

Commodities market sees volatility, with soft commodities leading gains while industrial metals lag behind

The commodities roller coaster is in full swing this year. Soft commodities are the stars of the show, with cocoa surging 66% and orange juice hitting record highs. Weather woes and supply disruptions are the culprits here. On the flip side, iron ore's taking a nosedive as China's property sector stumbles. Gold's still shining bright, hitting new peaks on rate cut hopes. Looking ahead, expect more twists and turns as we shift from El Niño to La Niña. Keep your eyes peeled – this market's anything but predictable.

CRYPTO

Bitcoin's impressive rally faces potential reversal as technical indicators suggest weakening momentum

Bitcoin's stellar run might be hitting a speed bump. After a jaw-dropping 300% surge since late 2022, technical analysis is flashing warning signs. The monthly stochastic indicator is on the verge of an "overbought downturn," which could spell trouble for the bullish trend. Other signals like the MACD are also losing steam. If confirmed by month-end, this could mark the end of Bitcoin's upward march from its 2022 lows. Bulls have struggled to break $70,000, and with these indicators wobbling, the crypto king might be in for a challenging ride ahead.

Tron's Justin Sun downplays concerns after $729 million in Bitcoin backing for USDD stablecoin was removed

Crypto drama alert! Justin Sun's in the hot seat after 12,000 Bitcoin vanished from USDD's collateral. That's a cool $729 million. Sun's brushing it off, claiming it's just "DeFi 101" and comparing USDD to MakerDAO's DAI. But here's the kicker – USDD's transparency page now shows zero Bitcoin backing. Instead, it's all about Tether and TRX now. While USDD's still over-collateralized at 230%, this sudden shift's got the crypto world buzzing. Is it just efficient capital management as Sun claims, or is there more to the story? Stay tuned – this tale's far from over.

Vitalik Buterin defends Ethereum's strength, citing recent technological advancements and ecosystem growth

Ethereum's co-founder Vitalik Buterin is hitting back at the naysayers. Despite claims of Ethereum weakening, he's painting a picture of "crazy strong" fundamentals. Here's the scoop: Layer 2 transaction fees have plummeted to under a penny, making Ethereum more accessible than ever. Optimism and Arbitrum are hitting their stride, and cross-L2 wallets are getting smoother. Plus, Zero-Knowledge tech is leveling up, and identity solutions are gaining traction. Buterin's message is clear – Ethereum's not just surviving, it's thriving. With daily transactions soaring past 1 million, it seems the network's evolution is in full swing.

MakerDAO proposes optional redenomination of MKR tokens into NGT as part of its strategic endgame plan

MakerDAO's shaking things up! They're offering MKR holders a chance to swap each token for 24,000 shiny new NGT tokens. Why? It's all about democratizing governance. By spreading out the token supply, more users can have a say in MakerDAO's future. But here's the kicker – it's entirely optional. Don't want to switch? No problem, your MKR stays put. They're also introducing a new stablecoin, NST, to buddy up with DAI. It's a bold move aimed at broadening participation and potentially setting the stage for mass adoption. The crypto governance game just got a lot more interesting!

GOLD

UBS forecasts gold prices to reach $2,700/oz by mid-2025, citing continued central bank buying and seasonal demand

Gold's glittering future just got a bit brighter, according to UBS. They're eyeing a shiny $2,600/oz target for gold by the end of 2024, with the precious metal potentially climbing to $2,700/oz by mid-2025. What's driving this golden outlook? Central banks are still on a buying spree, albeit at a slightly slower pace. While jewelry demand has cooled off a bit, UBS expects a seasonal boost come Q4 2024. Even with some minor selling from Singapore and China, the overall trend looks bullish. It seems the gold rush isn't over yet, folks!

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