📈 CPI Cools, Bitcoin Trembles, Gold Gleams

Good Morning!

Euro Stoxx 50 futures are flat, mirroring US contracts after Thursday's tech selloff. Asian tech stocks tumbled, with Japan, South Korea, and Taiwan hit hardest. The yen's wild ride continues as the BOJ intervenes. Despite this, global stocks are on track for their sixth weekly gain. Chinese equities in Hong Kong show promise, buoyed by policy support expectations. Treasury yields steady, while the dollar takes a breather.

In today’s email:

• US 🇺🇸 CPI: Came in cooler in June

• Bitcoin: Bitcoin Fear & Greed Index plummets to “extreme fear” as BTC hovers around $57k

• Germany 🇩🇪: Has ~9k BTC left to sell

• Gold: Surges close to all-time highs

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THE BIG IDEA

US inflation cools significantly in June, boosting expectations for Fed rate cuts as early as September.

We've got some game-changing inflation news hot off the press. The June CPI report just dropped, and it's a doozy that's got Wall Street buzzing.

Let's dive in: Core inflation (that's excluding food and energy) inched up a measly 0.1% month-on-month. To put that in perspective, it's the smallest gain we've seen since 2021, and it caught nearly every economist off guard. But wait, there's more! The headline CPI actually dipped 0.1%, thanks to energy costs taking a nosedive.

This cool-down is like music to the Fed's ears. We're looking at a 3.3% annual core inflation rate – the lowest since April 2021. Even better, the three-month annualized rate is flirting with the Fed's 2% target at just 2.1%. Talk about a Goldilocks scenario!

The market's reaction?

It's like Christmas came early. Traders are now betting their bottom dollar on a September rate cut, with at least two cuts expected by year-end. Treasury yields are tumbling faster than a house of cards, and the dollar's taking a beating against the yen.

So, what's driving this inflation slowdown? Shelter costs saw their smallest rise since 2001, and we're seeing drops in airfares and used car prices. The "supercore" services inflation (that's excluding shelter) declined for the second straight month in a row.

Is this the end of our inflation nightmare? Well, let's not count our chickens before they hatch. But it's certainly a step in the right direction. Keep your eyes peeled for the Fed's next move – things are getting spicy in the world of monetary policy!

MARKETS AT A GLANCE

TOP NEWS

Biden vows to stay in 2024 race despite gaffes at NATO summit, raising concerns about his mental acuity.

In a whirlwind of political drama, Biden's NATO summit performance has set tongues wagging. While aiming to showcase his stamina, the 81-year-old president stumbled, mistaking Zelensky for Putin and Harris for Trump. Ouch! Despite these slip-ups, Biden's determined to stay in the race, claiming he's "the best qualified person for the job." But with Democrats like Schumer and Pelosi seemingly nudging him towards the exit, and Trump gleefully mocking his missteps, the political landscape's getting spicy. Biden's response? "I've got to finish this job." The question is, will voters let him?

Biden warns China of European investment cuts if it continues supporting Russia, as NATO labels Beijing a 'decisive enabler' of the Ukraine war.

Looks like the geopolitical chess board is getting a shake-up. Biden's throwing down the gauntlet to China, warning that its coziness with Russia could cost it big time in European investments. NATO's not mincing words either, calling China a "decisive enabler" of Putin's Ukraine adventure. While Xi's not directly arming Russia, the West's patience is wearing thin over China's "dual-use" materials. European businesses are already getting cold feet about the Middle Kingdom, with investment plans at a record low. Is this the beginning of a new economic Cold War, or will China blink first?

Yen weakens as suspected intervention and rate checks lose impact, highlighting Japan's currency challenges ahead of key policy decisions.

Despite suspected intervention and rate checks by Japanese authorities, we're back to square one. The BOJ's morning rate check briefly rallied the currency, but gains vanished faster than sushi at an all-you-can-eat buffet. With a record ¥9.8 trillion spent in April and May, Japan's in a tight spot. All eyes are on the July 31 BOJ and Fed meetings. Without significant policy shifts, structural issues like the wide interest rate gap with the US continue to weigh on the yen.

CRYPTO

Bitcoin's Fear and Greed Index plunges to "extreme fear" as price struggles below $60K.

Bitcoin's hitting some turbulence. The Fear and Greed Index just nosedived to "extreme fear" – a level we haven't seen since January 2023. BTC's failed twice to breach $60K in 48 hours, sparking concerns. What's behind this? Mt. Gox repayments and potential German government sales are spooking investors. But don't panic yet – some analysts see hope in Fed rate cut bets and upcoming FTX repayments.

Supreme Court's Loper Bright ruling could reshape crypto regulation in the US.

The Supreme Court's recent Loper Bright decision is shaking up the crypto regulatory landscape. By overturning the Chevron deference, it limits federal agencies' power to interpret ambiguous statutes. This could embolden crypto firms to challenge SEC overreach and push for clearer Congressional legislation. While not an immediate game-changer, experts say it levels the playing field for crypto companies battling regulators. It may also prompt agencies to be more cautious in crafting new rules. The full impact will take time to unfold, but it's a significant shift in the regulatory balance of power.

Germany's Bitcoin holdings plummet as government continues massive sell-off.

Germany's Bitcoin stash has shrunk to just 9,094 BTC, a mere 18% of its initial seizure from a piracy site. In a whirlwind of transactions on July 11, the government's wallet briefly dipped below 5,000 BTC after transferring $615 million to various exchanges. This sell-off, combined with Mt. Gox repayment fears, has fueled Bitcoin's recent price slump. Critics argue Germany missed an opportunity to use Bitcoin as a strategic reserve. The crypto market's fear index has hit "Extreme Fear" for the first time since January 2023.

GOLD

Gold surges close to all-time high amid economic and geopolitical uncertainties.

Gold's on a tear, folks! It's up $51 to $2,422, eyeing its all-time record close of $2,425 set in May. What's driving this golden rally? Take your pick: rate cut expectations, sluggish growth, ballooning deficits, political instability, or geopolitical tensions. Despite China's pause in gold buying, the yellow metal's shine hasn't dimmed. While today's intraday high of $2,449 might be out of reach, gold bulls are setting their sights on new records in the coming week. Looks like the safe-haven sparkle is back in full force!

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