Bitcoin Struggles For Meaningful Recovery After Recent Consolidation — Market Talk
0712 GMT - Bitcoin rises but struggles to stage a meaningful recovery after hitting a two-and-a-half-week low in the previous session. The cryptocurrency has continued to consolidate from a record high reached last week as investors take profits and look ahead to key risk events. Markets are awaiting potential clues about interest-rate cuts from Federal Reserve Chair Jerome Powell at the Jackson Hole symposium. He is due to speak at 1400 GMT. Cryptocurrencies and other risky assets could receive a boost if Powell endorses market expectations that the Fed could resume cutting rates in September. Bitcoin edges up 0.5% to $112,986 after falling to a low of $112,008 on Thursday, LSEG data show. It reached an all-time high of $124,480 on August 14. ([email protected])0709 GMT - Germany's economic recovery continues to recede into the distance, says Carsten Brzeski at ING. Europe's most important economy shrank by 0.3% in the three months through June, according to figures released Friday. This is a revision from the previous estimate of a small 0.1% contraction. Looking ahead, tariffs will weigh on the export-oriented Germany economy, Brzeski says. "It could take until next year before a more substantial recovery starts to unfold," he warns investors in a note. ([email protected]; @joshualeokirby)0655 GMT - Concerns over U.S. fiscal dynamics, alongside threats to the Federal Reserve's independent status, pose a risk to long-dated U.S. Treasurys, says Schroders' James Bilson in a note. This is despite Schroders' view that the Fed could reduce rates more quickly due to a weak labor market. "The outlook for longer-dated bonds in the U.S. is less positive," he says. President Trump has in the past few months pressured Fed Chair Jerome Powell to cut interest rates. ([email protected])0645 GMT - The dollar rises as investors weigh stronger-than-expected U.S. economic data ahead of an eagerly awaited speech from Federal Reserve Chair Jerome Powell later at the Jackson Hole symposium. The U.S. purchasing managers' index survey on Thursday exceeded expectations, boosting the dollar. The data prompted investors to dial back Fed rate-cut expectations, Deutsche Bank analysts say in a note. That leaves investors in a "jittery mood" ahead of Powell's speech at 1400 GMT, they say. "Investors will be keenly watching whether Powell places more emphasis on weaker payrolls versus more stable measures of labor market slack and still-solid activity and inflation data." The DXY dollar index rises 0.1% to 98.757, having earlier reached a one-and-a-half-week high of 98.834. ([email protected])0626 GMT - The probability of an interest-rate cut by the Federal Reserve in September might fall after Fed Chair Jerome Powell's speech at the Jackson Hole Symposium on Friday, says Pepperstone's Michael Brown in a note. With a month still to run until the September FOMC, during which time August jobs, CPI and PPI reports are due, as well as with uncertainty remaining elevated, "there is little-to-no benefit in Powell pre-committing to any action later on today," the senior rates strategist says. Consequently, the odds of a September rate cut might be closer to 50/50. Money markets currently price a 70% probability of a rate cut in September, according to LSEG data. ([email protected])0624 GMT - U.S. Federal Reserve chairs have used the annual Jackson Hole Symposium before to communicate important shifts in guidance, but this year that is unlikely to be the case, says Commerzbank Research's Christoph Rieger in a note. "While we don't expect a major shift, in line with earlier guidance [that the Fed is waiting for more data], it would be consistent to open the door for a 25bp rate cut in September," says the head of rates and credit research. Markets price in a 70% probability of a 25bp interest-rate cut in September, according to LSEG data. ([email protected])0606 GMT - Singapore's CPI likely rose 0.75% on year in July, according to the median estimate of nine economists' polled by The Wall Street Journal using LSEG data. This would be slightly lower than June's 0.8% climb. Food prices, one of the largest components of the CPI basket, have stayed moderate, says Denise Cheok at Moody's Analytics in an email. While car prices likely remained high, relatively low oil prices due to the oil market's supply glut will likely cap petrol prices, she adds. Meanwhile, core CPI likely rose 0.6%, holding steady from June, according to eight economists' estimates. The CPI data is due Monday. ([email protected])0605 GMT - German 10-year Bunds could be a good buy at current yield levels, says Commerzbank Research's Christoph Rieger in a note. "We suggest tactical Bund longs at 10-year yields near 2.8%," the head of rates and credit research says. With money markets still discounting a trough of 1.85% in the European Central Bank's deposit rate, two-year German Schatz yields could still test their recent highs near 2% and 10-year Bund yields near 2.8%, he says. ([email protected])0557 GMT - U.S. Treasury yields edge marginally lower in Asian trade with investors focusing on the Federal Reserve's Jackson Hole Symposium and Fed Chair Jerome Powell's speech. Powell will likely highlight longer-term economic challenges, such as demographics and productivity, says LPL Financial chief economist Jeffrey Roach in a note. He also expects Powell to cement his legacy rather than deliver a brief, sharp message. The two-year Treasury yield falls 0.7 bp to last trade at 3.784% and the 10-year yield is at 4.328%, down 0.2 bp, according to Tradeweb. ([email protected])0547 GMT - Money markets are potentially too optimistic about interest-rate cuts by the U.S. Federal Reserve, Societe Generale rates strategists say in a note. With U.S. inflation moving further away from target and job growth slowing, the Fed is in a tough spot, the strategists say. "However, we believe the market has overreacted to the July nonfarm payroll print, and the slowdown in job growth may be consistent with stable unemployment," they say. In their view, "too many cuts are priced in," and against this backdrop they like positions betting on the Treasury yield curve flattening over the near-term. Money markets expect two rate cuts by the Fed in 2025. ([email protected])0534 GMT - Bond yields have been rising in August, particularly in Europe, but current high yields are likely to attract demand back, say Societe Generale rates strategists. The recent U.S.-EU trade deal has reduced uncertainty, leading markets to get closer to pricing a long pause by the European Central Bank, and driving eurozone bond yields to new highs, they say. "While this aligns with our medium-term view for rising term premiums, markets have moved ahead of fundamentals and are anticipating September supply," the strategists say. They anticipate demand to return soon at current yield levels. ([email protected])0453 GMT - Singapore equities are likely to ride on the safe-haven appeal of the Singapore dollar, says Julius Baer's Jen-Ai Chua in a note. Singapore's currency stability and robust underlying economy enhance the Singapore dollar's appeal to investors looking for U.S. dollar alternatives. Singapore-dollar bonds provide stability and quality, and investors with a greater risk appetite could consider the city-state's equities, she says. The island nation's stock market offers the Asian region's second-highest forward dividend yield at 5.12%, she adds. Julius Baer upgrades Singapore equities to overweight from neutral, citing attractive valuations, defensive currency and anticipated liquidity boost from the city-state's equity reform program. ([email protected])