Bitcoin Rises to 3-Week High as ETF Flows Rise — Market Talk

0814 ET - Bitcoin rises to a three-week high as crypto sentiment is buoyed by easing macroeconomic worries and continued exchange traded fund inflows, Saxo Bank analysts say in a note. A trade agreement between the U.S. and Vietnam boosted market optimism with tariffs set lower than feared, they say. Wednesday's softer ADP private payrolls report increased bets for Federal Reserve interest rate cuts, further supporting risk appetite. Institutional demand for cryptocurrencies remains strong with BlackRock's bitcoin ETF and the new iShares ethereum ETF rising. Meanwhile, Ripple, which manages a dollar-backed stablecoin called RLUSD, has applied for a national banking license. It joins a number of cryptocurrency companies trying to cross into mainstream finance. Bitcoin rises to $110,279. ([email protected])0748 ET - Sterling faces renewed falls after a flare up in U.K. political uncertainty and fresh fiscal concerns Wednesday triggered a selloff in the currency, MUFG Bank's Lee Hardman says in a note. U.K. Prime Minister Keir Starmer initially failed to back Treasury chief Rachel Reeves in parliament Wednesday. This followed the government's U-turn on welfare reforms due to pressure from some Labour MPs. Policy U-turns have undermined confidence in Labour's leadership while raising doubts over how serious the party is about fiscal policy consolidation, Hardman says. "Unless confidence is quickly restored the pound will continue to trade on an even weaker footing than we had expected." Sterling rises 0.1% to $1.3655. The euro falls 0.2% to 0.8634 pounds. ([email protected])0721 ET - The Swiss National Bank will need to take its key interest rate below zero as inflation falls into negative territory later this year, Pantheon Macroeconomics' Melanie Debono says in a note. Swiss inflation rebounded to 0.1% in June, a higher-than-anticipated reading that lifts expectations for the coming months, she says. However, inflation is set to dip back below zero between November and April next year, putting another rate cut to minus 0.25% in September into focus, Debono says. Markets predict negative rates this year, though are split on when. "We think the SNB will not need to stomach negative rates for long and can soon hike again. We have a rate hike penciled in for December 2026," she adds. ([email protected])0644 ET - The U.S.-Vietnam deal raises the hope for other Southeast Asian countries to come to trade agreements, says Lavanya Venkateswaran, senior ASEAN economist at OCBC. The relief felt by the region comes more from the clarity of the tariff rate rather than the agreement itself, as it provides near-term clarity for businesses less reliant on intermediate goods from China, Venkateswaran says. However, the 20% rate is still high, and exports to the U.S. will likely slow, weighing on the short-term growth outlook and could threaten Vietnam's cost competitiveness compared to other Southeast Asian countries, Venkateswaran adds. "The case to use Vietnam as a base for exports to the U.S. diminishes with the higher tariff rates," they say. ([email protected])0634 ET - Higher U.S. tariffs on transhipped goods through Vietnam will likely impact Vietnam's economy more than those on other goods, Deepali Bhargava of ING writes in a note. The new 20% U.S. tariff rate on Vietnam's exports could put 2.5% of its GDP at risk, but the 40% tariff targeting transhipments will hit it harder, Bhargava says. Such flows from China have risen recently and will impact exports, with studies estimating that "indirect Chinese content" in Vietnam's exports to the U.S. ranged between 16%-28% in 2021/2022, Bhargava says, noting that some companies label "Made in Vietnam" on China-made goods, "making it an illegal but difficult-to-trace practice." ([email protected])0631 ET - The automotive sector and the construction sector are expected to record higher insolvencies in 2025, Allianz Research strategists say in a note. Changes in technology and rising competition are likely to put pressure on the automotive industry, and drive up the rate of insolvencies, the strategists say. Global corporate insolvencies are expected to increase by around 7% in 2025, they say. ([email protected])0606 ET - Long-dated government bond yields face structural headwinds, Edmond de Rothschild Asset Management's Benjamin Melman says in a note. "Long-term rates in the U.S. are at risk owing to the government's intention to continue lowering taxes without truly offsetting the revenue loss with public spending cuts," the global chief investment officer says. In the rest of the world, public investment needs are increasing substantially due to the geopolitical shift, he says. Term premiums--the additional yield investors demand to hold a long-dated bond rather than a short-dated one--are rising and should continue to grow, Melman says. "Overall, we prefer to steer clear of long duration bonds, as we feel the risk of a recession is moderate," he says. ([email protected])0559 ET - The upcoming U.S. nonfarm payrolls report will play a major role in determining whether the dollar's recent downward trend has further to go, ING's Chris Turner says in a note. Federal Reserve Chair Jerome Powell argues that sticky inflation and a solid labor market mean interest rates should remain restrictive for now. "Any downside surprise in the jobs report would weaken his position and allow the market to push on with pricing a rate cut at the July meeting." Barring weaker-than-expected jobs data, the dollar could continue consolidating ahead of the July 4 U.S. holiday, he says. The data are due at 1230 GMT. The DXY dollar index rises 0.1% to 96.833 after hitting a three-year low of 96.377 Tuesday.([email protected])0558 ET - China is likely to have a "supply side reform 2.0" in the near term to boost its economy, Citi analysts say in a commentary. Supply side reforms from 2015-2018, which addressed structural imbalances within the Chinese economy, put an end to a 54-month-long PPI deflation, they point out. "We see the prolonged PPI deflation and profitability concerns as the motives this time. Steady growth so far this year has also opened room for such an initiative," the analysts say. All eyes are on possible action in the coming weeks from the Politburo meeting, the State Council, National Development and Reform Commission and related ministries, Citi says. ([email protected])0550 ET - The cost of insuring euro credit against default using credit default swaps falls as global trade concerns ease. Investors sentiment is improving as the U.S. signs trade agreements with more nations. The Vietnam trade deal lifts hopes for an agreement between the EU and the U.S., Deutsche Bank strategists say in a note. The iTraxx Europe Crossover index, which tracks euro junk bond credit default swaps, declines 1 basis point to 282bps, S&P Global Market Intelligence data show. ([email protected])0532 ET - The U.S.'s ability to repay its debt remains intact, UBS Global Wealth Management says in a note. It expects the U.S. house to approve President Trump's economic policy agenda, although the non-partisan Congressional Budget Office estimates the bill will add $800 billion more to the national debt than the initial House version over the coming decade, UBS GWM says. "But we think the U.S. remains able to manage its debt," UBS GWM says. The Federal Reserve's credibility, the U.S. dollar's reserve status, deep and liquid Treasury markets, Fed balance sheet holdings, and bank capital regulations could all help finance the deficit, it says. ([email protected])0504 ET - Vietnam's trade deal provides a benchmark for the rest of Asia in their ongoing trade negotiations with the U.S., ANZ analyst Khoon Goh says in a research note. A study has shown that 16.5% of Vietnamese exports to the U.S. in 2021 were classified as transshipping. Assuming the percentage of transshipment remains at that level, the effective tariff rate would rise to 23%, the analyst notes. Meanwhile, the tariff is at the higher end of the range of ANZ's expectations. "The transshipment tariff could be part of any deal between the U.S. and other Asian trading partners that are suspected of being a source of rerouted goods," they say. However, the trade deal removes major uncertainties for businesses operating in Vietnam, he adds. ([email protected])