🤯 Fed's Rate Decision: Interest Rates on Hold, But What's Next?

Good Morning!

Markets are buzzing with anticipation as we digest the Bank of Japan's rate hike and gear up for the Fed's next move. The BOJ raised rates to 0.25%, sending ripples through Asian markets. All eyes are now on Jerome Powell, with hopes for a September rate cut. Meanwhile, the Aussie dollar took a hit after surprising inflation data, and Chinese stocks jumped on policy support expectations.

In today’s email:

• Fed Watch: All eyes today on Fed rate decision

• Bitcoin: Bitcoin waiting patiently around $66k

• BoJ: Raised interest rates

• Nvidia: Beating Bitcoin volatility

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THE BIG IDEA

The Federal Reserve is expected to hold interest rates steady while signaling a potential rate cut in September, amid improving inflation outlook and a cooling labor market

The Federal Reserve's upcoming policy meeting is shaping up to be a pivotal moment in the current economic cycle. While the Fed is widely expected to maintain its benchmark rate at the 5.25% to 5.5% range, all eyes are on the signals it will send about future rate cuts.

Recent tame inflation readings have bolstered the case for easing monetary policy. The Fed is likely to acknowledge this progress in its statement, potentially upgrading its language from "modest" to "further" progress towards the 2% inflation target. This subtle shift could pave the way for a rate cut as soon as September.

Fed Chair Jerome Powell's press conference will be closely scrutinized for hints about the timing and pace of future rate cuts. While he's expected to welcome the improving inflation outlook, Powell will likely maintain the Fed's data-dependent stance, avoiding specific commitments.

The labor market will be another key focus

With unemployment ticking up to 4.1% from its 3.4% low in early 2023, Powell may face questions about what level of weakening would prompt a more aggressive easing cycle.

Market expectations are currently pricing in more than a quarter-point cut for September, with additional cuts anticipated in November and December. However, Powell is likely to stress that politics, including the upcoming presidential election, play no role in the Fed's decisions.

As the Fed navigates this delicate balancing act, its communications will be crucial in shaping market expectations and economic outcomes. The coming meeting could mark the beginning of a new phase in monetary policy, with potentially far-reaching implications for the U.S. and global economies.

MARKETS AT A GLANCE

TOP NEWS

Bank of Japan raises interest rates and plans to reduce bond purchases, signaling a shift towards policy normalization

In a bold move, the Bank of Japan hiked its key rate to 0.25% and announced plans to halve bond purchases over two years. Governor Kazuo Ueda's hawkish tilt marks a significant shift from the ultra-easy policy era, potentially supporting the yen. Markets are buzzing, with the Topix closing 1.5% higher and bond yields jumping. This could be just the beginning – another rate hike might be on the horizon this year. Stay tuned for more economic fireworks!

The "Magnificent Seven" tech stocks have lost $2.6 trillion in market cap over 20 days, while crypto markets have gained 11%

The tech giants are taking a beating! The "Magnificent Seven" - Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla - have shed a whopping $2.6 trillion in market value over just 20 days. That's triple the entire Brazilian stock market! Meanwhile, crypto's laughing all the way to the bank with an 11% gain. As earnings week approaches, all eyes are on these tech titans. Will they bounce back or continue their downward spiral? The crypto world is watching closely, ready to pounce on any market shifts.

US natural gas futures jumped 4% to a one-week high on forecasts for record heat, despite bearish factors like rising output and lower demand forecasts

Natural gas is heating up. Futures jumped 4% to $2.126 per million BTUs on forecasts of scorching temperatures that could push power generators' gas consumption to all-time highs. This comes despite increased output and lower demand forecasts for the next two weeks. The Freeport LNG plant in Texas is also ramping up to a 14-month high after a hurricane-induced outage. With storage levels 17% above normal, we might see an unusual August withdrawal - the first since 2006. It's a hot market in more ways than one!

CRYPTO

Senator Lummis proposes a Strategic Bitcoin Reserve, partially funded by revaluing the Federal Reserve's gold holdings to market prices

Senator Cynthia Lummis is shaking up the crypto world with her bold "Bitcoin Act of 2024" proposal. The plan? Create a Strategic Bitcoin Reserve of up to 1 million BTC over five years. But here's the kicker - it'll be partly funded by revaluing the Fed's gold stash to current market prices. That's a potential 50x jump from the current $42.22/oz book value! The bill also calls for a network of secure Bitcoin vaults across the U.S. Is this the dawn of a new era for Bitcoin in American finance?

Nvidia's stock volatility has surpassed that of Bitcoin and Ethereum, indicating increased uncertainty in the AI chip maker's future performance

Nvidia, the AI chip powerhouse, is stealing the volatility crown from crypto! The company's 30-day implied volatility has skyrocketed to 71%, outpacing Bitcoin's 49% and Ethereum's 55%. This surge suggests traders are bracing for wild price swings in NVDA stock. Interestingly, Bitcoin and Nvidia have been dancing to the same tune since late 2022, with a strong positive correlation of 0.73. As Nvidia's stock takes a 26% tumble from its recent peak, crypto markets are watching closely. Is this a case of the AI tail wagging the crypto dog? The plot thickens!

Bitcoin traders expect a September breakout but are less confident about reaching $100,000 in 2024, with many now eyeing 2025 for that milestone

Bitcoiners are gearing up for a September surge, but they're pumping the brakes on that $100k dream for 2024. The crypto crystal ball is now pointing to 2025 for the six-figure milestone. Trader Rekt Capital sees a breakout coming, while others are eyeing the $70k-$74k range as the next hurdle. With Bitcoin currently hovering around $66k, the market's playing a game of "will it or won't it?" And let's not forget Trump's recent Bitcoin push – could it be the catalyst we've been waiting for?

California's DMV has digitized 47 million vehicle titles on the Avalanche blockchain, aiming to streamline processes and enhance security for residents

California's DMV just put 47 million vehicle titles on the Avalanche blockchain, waving goodbye to those pesky paper pink slips. Now Californians can manage and transfer their car titles with a few taps on their phones. No more DMV queues or snail mail hassles! This tech upgrade also comes with a bonus - an early warning system for lien fraud. It's a big win for the Golden State's 39 million residents and a green light for blockchain in government operations. As the world's fifth-largest economy embraces this tech, other states might soon follow in California's tire tracks. The future of vehicle ownership is looking decidedly digital!

GOLD

Gold's recent behavior deviates from its typical role as an economic indicator, with Chinese speculators playing a significant role in driving the market

Gold's gone rogue! Normally a reliable economic barometer, it's now dancing to its own tune, leaving analysts scratching their heads. Enter the Chinese speculators, firms like Zhongcai Futures are making massive, leveraged bets across global markets, raking in hundreds of millions in profits. But here's the twist - China's gold demand has actually cooled off. With traditional correlations out the window and physical demand in the West plummeting, gold's defying gravity. Will these Chinese traders win the war, or will economic reality eventually bring gold back down to earth?

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