OPINION
Market Rating Before FOMC MeetingJan 31
U.S. Bonds at 1-Month High: Cryptos Struggling to Rebound
The bond market in the United States, was under pressure in the first half of August, with headline inflation (CPI) falling to 8.5 percent in July. At this point, market optimism that the effects of the US Federal Reserve's (FED) monetary tightening would be seen and rate hikes would slow was effective, as the CPI had renewed its 41-year high of 9.1 percent in the previous month. As a result of this, there has been a relative recovery in cryptocurrencies, led by US technology stocks, as investor stress has decreased.
Nonetheless, at the Jackson Hole Symposium, despite the expectation that FED Chairman Jerome Powell will make statements to central banks slowing monetary tightening due to recession risks, he emphasized the importance of data. At the September meeting, it left the door open for another 75 basis point rate hike, eroding market optimism.
Indeed, the CME survey reveals that the 75 basis point rate hike expectations for the Federal Open Market Committee (FOMC) meeting in September, which is still a few days away, have gained weight with the current 70.5 percent, 61 percent daily, and 53 percent weekly levels.
The relief from the pressure of bond interest rates in international assets was not permanent. With the pricing of expectations that the FED will maintain the monetary tightening momentum, the 2-year US Treasury yields reached the highest level since June 15 at 3.42 percent, while the indicator has erased the losses of the 10-years and a month at 3.13 percent. Together with the value effect, the dollar index may have reached its highest level in 20 years around 108.
At this point, the persistence of the US 10-year indicator above 3.00, the psychological borderline, is critical. The crypto money market may struggle to find demand for holdings above this level.
As a result of the stressful atmosphere in the markets, the risk of not finding demand for cryptocurrencies is quite high in the face of sales in treasury returns. If the $ 22,000 resistance is not exceeded in Bitcoin, it can force it to descend to $ 17,000, which will be the lowest in 2 years after $18,590.
