Liquidity Rising
Dovish Fed Statement
On Wednesday, the Federal Reserve raised the target Fed Funds rate range by 25 basis points (BPS), marking the ninth increase in just over a year. The FOMC statement hinted at a nearing end to rate hikes by removing the reference to "ongoing increases."
According to the FOMC's updated forecast, there will be one more rate increase this year, and officials expect slower economic growth in 2023 compared to previous estimates. The market generally responded well to this information, with major equity indices and cryptoassets remaining mostly unchanged immediately after the report's release and throughout most of the press conference.
However, Treasury Secretary Yellen, while testifying before Congress, refused to provide assurances regarding insuring a greater percentage of deposits across the troubled banking sector. This happened towards the end of Powell's press conference and led to a significant sell-off in bank equities, which spilled over into broader risk assets.
Despite the volatility in asset prices following Yellen's statements, the key takeaway from the FOMC meeting is that both the statement and press conference were more dovish than markets had anticipated a month ago.
This dovishness is justified, as ba...Unlock this page with a FREE 30-Day Trial!
If you are already a member at FS Insight, please Sign In If you don’t have a subscription to FS Insight yet, you can sign up below.
Our FS Insight Guest PASS offers you 3 complimentary research reports every month.
Our FS Insight Guest PASS offers you 3 complimentary research reports every month.
Reports you haven't read
The crypto market has seen a significant reversal of its weekend rally as investors watchfully anticipate the House vote on the debt ceiling agreement brokered between the White House and the House Speaker. BTC -2.53% has fallen below the $27k mark, while ETH -2.00% grapples with maintaining a foothold above $1850, and other altcoins face more considerable downward pressure. Optimism (OP -4.85% ) has seen a roughly 4% decrease in value, hitting its lowest...
After showing gains in after-hours trading, markets retraced on the first trading day after Memorial Day Weekend. President Biden and House Speaker McCarthy struck a tentative deal to raise the U.S. debt ceiling, although markets are ambivalent on whether it can be implemented by the June 5th deadline. SPX and QQQ opened 0.5% and 1.1% higher from last week's close before retracing to 0.1% and 0.9% higher, respectively. Treasury yields...
AI SKEWING THE PICTURE Previous observations highlighted how the decline in crypto prices signaled a temporary liquidity peak, potentially tied to the impending debt ceiling deal. Correlations between BTC, gold, and equities illustrated BTC's sensitivity to liquidity changes. As anticipated, BTC/Gold and BTC/equities (excluding AI-related names) correlations are now strengthening, with gold and equities tracking BTC's lead. Over the past few weeks, our discussions have centered around an observed shift...