EE.UU: Yesterday, Williams of the Fed resisted the idea that talks about the end of quantitative tightening should start and stated that a March Fed cut would require exceedingly high standards. However, he thought that the rates were sufficiently onerous to curb inflation.
Nevertheless, the dollar weakened again yesterday, after several hours of rising towards 102.50 DXY, falling 20-30 bp.
US bond yields continue to cool and fall, despite temporary rallies, with clear declining lows. The 2 year bond stands at 4.35%, a low not seen since summer 2023.
All this, together with the SP500 remaining at all-time highs 4.800, with SP500 Futures trading in contango, indicates that the markets are showing some calm.
Following much conjecture, the US SEC approved exchange-traded funds (ETFs) with direct Bitcoin investments. XBT had a turbulent day, but it is currently trading at $46740, essentially unchanged from yesterday.
Surprisingly, the Tweet published after the hacking of the SEC account, confirmed by X, produced much more volatility in Bitcoin than the actual news published a day later.
US crude oil inventories showed further declines despite expectations of further reductions. It is possible that the US is rebounding from the sharp decline in inventories in recent months by taking advantage of the low oil prices.
UK: Yesterday’s remarks to parliament by the Bank of England’s Governor were of little relevance to the pound. Bailey declared that he was not interested in discussing the future of monetary policy. “but let’s just take the market for a moment – obviously that is feeding through into mortgage costs and I hope that is something that continues.”
“Obviously we have had a big change in market interest rates in the last few months and so the cost of mortgages is coming down,” Bailey told lawmakers in parliament at a Treasury Committee hearing.
Europe: German wholesalers are alarmed by the “on the floor” mood. In real terms, the association of wholesalers and exporters expects a 1% decline for this year following a 4.25% contraction in 2023.
“The results of our current company survey are alarming. While other economies have already recovered, Germany is stuck in an economic dead end,” Dirk Jandura, president of the BGA, the Federation of German Wholesale, said.
China: A Reuters survey indicated that while the central bank maintains an accommodating stance in order to bolster an unsteady economic recovery, new bank loans in China most certainly increased in December, pushing 2023 lending to a new record high.
Deflation: A significant obstacle stands in the way of China’s central bank combating the threat of deflation: a greater amount of credit is going to productive sectors of the economy than to consumption, which is revealing structural weaknesses and lessening the impact of the bank’s monetary policy instruments.
Agenda: Today we will have two relevant data published. The US CPI rate & Initial Jobless Claims.
I will keep you informed. Good luck with your investments.