- International politics is fermenting. Amid the turbulent situation, the US dollar continues to strengthen. This is not only due to political and war factors, but also the fact that the U.S. economy is becoming more and more obvious. It is not an exaggeration to call it a score-earning question for long on the U.S. dollar.
- All institutions are shorting the yen, and the yen has become a casino, full of signs of hedge funds, retail investors, speculators, and the Japanese government trying to turn the tide.
- The highly discussed U.S. presidential election does not affect the trend of traditional financial markets at all based on the structure of the U.S. political system and financial system; however, Trump, who has expressed high support for Crypto, has a direct impact on the trend of related Meme sectors.
- The conversation between Fed officials was as boring as ever and lacked any substantive guidance.
- U.S. data were mixed throughout the week, with interest rate cut expectations almost unchanged and appetite for risky assets remaining strong.
- The market currently believes that the probability of an interest rate cut in September is about 65%, and believes that a total of nearly 2% of interest rate cuts will be carried out before the end of the year.
- SOL's ETF application is unlikely to be approved in the short term. It is more of an incitement to emotions and a provocation to government authority.
Important information this week
1. New home sales in the United States plummeted 11.3% month-on-month in May, hitting a six-month low, and the housing market is recovering slowly.
It was announced on Wednesday that U.S. new home sales plunged 11.3% month-on-month in May to a seasonally adjusted annual rate of 619,000 units, a six-month low, as soaring mortgage rates weighed on demand, further signaling a slow recovery in the housing market. However, April's data was revised sharply upward from the initial estimate of a decrease to an increase, which offset the impact of low sales in May and the supply of new homes hit a new high in more than 16 years. U.S. bond yields rose briefly after the data was released, but then fell.
2. Data show that labor market conditions are loosening
Data released on Thursday showed that the number of initial claims for unemployment benefits in the United States fell last week, but the number of continuing claims in mid-June jumped to the highest level in two and a half months, suggesting that labor market conditions have deteriorated amid slowing economic growth. is loosening.
3. Weak economic data and weakening momentum increase the possibility of the Federal Reserve cutting interest rates in September.
Other data released on Thursday highlighted the weakening economic momentum. Core durable goods expenditures fell by 0.1% in May, lower than market expectations for a 0.2% increase. The decline in exports led to the expansion of the merchandise trade deficit; the annual GDP growth rate in the first quarter dropped from the previous quarter. 3.4% fell to 1.4%, in line with expectations. A series of weak data increased the possibility of the Federal Reserve cutting interest rates in September.
4. PCE and Michigan Consumer Confidence Index data were released, basically in line with market expectations
PCE data was released on Friday that was slightly stronger than expected, with YoY +2.6% and MoM unchanged, but basically in line with market expectations. U.S. bond interest rates rebounded to where they were two weeks ago.
The U.S. consumer confidence index surveyed by the University of Michigan in June was revised upward to 68.2, slightly higher than market expectations. In addition, inflation expectations for the next one and five years have been adjusted downward to 3%. Digital sentiment is mixed, and although the University of Michigan's survey has been discussed to a certain extent, the data itself is relatively unimportant to institutions. It reflects the expectations of households rather than the expectations of market participants.
5. Even if the government intervenes, it still cannot prevent the yen from continuing to be bloodbathed by the market
The yen continues to fall. We can see obvious government intervention on the online chart, but it is obviously not respected by the market. The yen continues to depreciate, hovering around the 160 level. The yen has become a casino where everyone rushes up and down. There is no fundamental support anymore, and the market is unilaterally bloodbathing the Bank of Japan and the Ministry of Finance. Separately, the Bank of Japan is investigating Japanese government bond market participants over its bond reduction plan.
The survey is expected to serve as the basis for discussions at the Bank of Japan’s talks with bond market participants on July 9-10, and the survey will ask market participants, including banks, brokerages and life insurance companies, about their expectations for the scope and pace of cuts, the message said. .
6. The euro is weakening, the market is pessimistic, and the French election is closely watched.
EURUSD fell and came to 1.0700 ~ 1.0720 for range consolidation. The market is leaning towards pessimism, focusing mainly on the French election held at the weekend. German Chancellor Scholz confirmed that the three main centrist groups in the European Parliament have reached an agreement on the EU's highest position and nominated von der Leyen to be re-elected as President of the European Commission, which is expected to be approved.
7. What do officials from all parties think of the current inflation?
Atlanta Fed President Bostic said that recent data show new progress, including that the proportion of goods and services with annual price increases of more than 5% has fallen below 20%, which is closer to the level before the new crown epidemic and last year. The proportions are similar when the expansion slows down.
Fed Governor Bowman reiterated that she is not yet ready to support an interest rate cut while inflationary pressures remain high. Bowman said overall economic activity has been strong this year but has slowed, and progress on inflation has stalled.
International Monetary Fund (IMF) President Georgieva said that inflation will return to the Federal Reserve's 2% target in 2025, earlier than the Fed's own forecast of 2026, in part because of the decline of U.S. consumers after the COVID-19 epidemic. The spending boom may be fading. However, the IMF expressed concern about the high debt level in the United States and called on the United States to adopt a tighter fiscal policy.
8. VanEck and 21Shares have successively submitted applications for Solana ETF
On 6/27, VanEck submitted an application for Solana ETF, and the price of SOL instantly rose by about 10% upon hearing the news; 21Shares followed suit and also submitted an application on 6/28. Considering that SOL currently has over-concentrated chip structure, has been designated as a security by the SEC many times, has not yet entered the CME futures market, and has poor profitability after listing, etc., in the absence of significant changes in the SEC composition structure, we believe that The Solana ETF has a pass rate of 0% in the short to medium term.
But this does not affect the emotional hype very much. The driving force of funds is often dominated by emotions and consensus. The act of submitting an ETF application is more like a demonstration and provocation against the government. In line with the expected approval of the ETH spot ETF, the SOL incident may bring some willingness to speculate in the current liquidity-drained Crypto market, and this also gives some potential to narrative traders. operating space.
Things to do next week
- The US S&P and ISM PMI indices will be released from Monday to Wednesday, and Europe will also release the HCOB PMI index.
- The minutes of the FED meeting on Wednesday night are of greater interest. If clues can be found in the officials' opinions, the market may find an issue to speculate on. But we don't expect any good news, because the attitude of most officials has clearly become more conservative in recent months, and operations will need to be done with extra caution.
- Non-farm payroll data will be released on Friday evening. As analyzed previously, this part is affected by many factors. It is not only difficult to predict, but may also insert a pin in the price at any time, which is also a lightning point that traders need to pay attention to.
Conclusion
The massacre of the Japanese yen and the incompetence of the Japanese and French governments were the biggest highlights of the traditional financial markets this week, which in turn inspired the US dollar to rise to a certain extent. Speaking of the U.S. dollar, we plan to talk to you next week about the topic of "Why the U.S. dollar can still stand firm despite being collectively besieged by the BRICS and N countries."
It is undeniable that the topic of the overall crypto market is still very limited, mainly focusing on ETH and SOL where there is an expected game of ETF. According to The Block, the SEC has returned Form S-1 to potential ETH spot ETF issuers with comments, requiring these comments to be processed and resubmitted before 7/8. We will also discuss this topic in the next weekly report. Will update with you all.
Stay tuned.
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