Crypto Market Took a Break from Support

The crypto market cap lost another 0.9% over the last 24 hours, pulling back to $2.44 trillion and extending losses from Friday’s peak to 8%. Since the end of the day on Tuesday, market volatility has noticeably decreased as more traders are taking a wait-and-see stance ahead of the inflation report and FOMC meeting results.

Fed Can End US Indices' Divergence

The US indices, S&P500 and Nasdaq100, closed at new all-time highs, largely due to Apple’s positive performance. However, other markets and indices are far from similarly positive. This both leaves room for growth and indicates investor wariness.

US: Inflationary Pressures Cool More Than expected in May 

The May CPI reading delivered a pleasant surprise, coming in handily below the consensus forecast. Importantly, last month's deceleration offers further support that the flare-up in inflationary pressures earlier this year has subsided. The three-month annualized rate of change on core dipped to 3.3% – the slowest pace of growth since December 2023.

Sunset Market Commentary

US May CPI numbers served as an appetizer going into tonight’s FOMC meeting. Both headline (flat) and core (+0.2% m/m) inflation missed expectations for a 0.1% and 0.3% rise respectively. That resulted in slower y/y readings of 3.3% and 3.4% with the latter the lowest since April 2021.

After Macron's Election Gamble, Is Political Risk a New Headwind for the Euro?

Financial markets don’t usually pay so much attention to elections for the European Parliament, as national governments are often seen as the bigger force in setting EU policy. However, whilst the outcome of far-right parties faring well was widely predicted, it is the fallout in France, and potentially in Germany too, that is having ripple effects in the markets.

June FOMC: Sitting, Waiting, Wishing

As expected, the Federal Open Market Committee left the federal funds rate target range unchanged at 5.25-5.50% at the conclusion of its meeting today. Yet the latest Summary of Economic Projections showed most participants continue to expect at least some reduction in the fed funds rate before the year is out.

Patience and Caution Paramount for the FOMC

The June Committee forecasts are based on the momentum of Q1 not Q2’s softening. Westpac continues to expect incoming data to justify two cuts in 2024, beginning in September.

Fantastic, Then

The Federal Reserve’s (Fed) dot plot plotted one rate cut for 2024, down from three in March and the Fed revised its inflation forecasts higher. But the Fed’s announcement didn’t get more hawkish than this because the distribution of the dots was much narrower than in March;

Dollar Pared Some of Sharp Losses in Wake of Fed

The dollar pared some of the sharp losses in the wake of the Fed. EUR/USD returned from a high around 1.085 to 1.081, still up from the 1.074 at the open. DXY opened at 105.27, found support at 104.26 and finished at 104.64 from an 105.27.

Crypto Growth Derailed

The cryptocurrency market failed to get on the growth rails, losing 0.7% in 24 hours to $2.44 trillion, near end-of-day levels on Wednesday. The positive effect of the soft inflation report was erased by the Fed’s comparatively tightening stance, which suppressed appetite for risk assets. This is clearly visible in the demand for cryptocurrencies despite the rally in the S&P500 and Nasdaq100 indices.