Bitcoin's Recent Price Action Signals Shaky Start to Year — Market Talk

1142 GMT - Bitcoin's volatile movements this week signal a shaky start to 2025 for cryptocurrencies, LMAX Group strategist Joel Kruger says in a note. The recent volatility is largely related to swings in sentiment in traditional markets with crypto assets showing a stronger correlation to U.S. equities, he says. Markets have scaled back expectations for Federal Reserve interest-rate cuts this year, lifting U.S. yields and the dollar while reducing risk appetite. "Though there is plenty to be said for bitcoin rallying in risk-off trade, there continues to be an active market trading bitcoin as a risk asset, which can open downside when stocks sell off." Bitcoin falls 0.7% to $98,976 after reaching a one-week high of $100,805 overnight, according to LSEG. ([email protected])1140 GMT - Equity markets could be at risk if the 10-year U.S. Treasury yield rises above 5%, SEI's Jim Smigiel says in a note. The investment company will get concerned about equity markets once the yield reaches that level, as tighter financial conditions could begin to weigh on growth prospects. The 10-year yield is a key metrics for SEI due to the implications for equity markets. "The yield on the 10-year U.S. Treasury is our guide for 2025," says Smigiel, who is SEI's chief investment officer. The 10-year U.S. Treasury yield trades steady at 4.655%, having risen to a 14-month high of 4.809% on Tuesday, according to Tradeweb. ([email protected])1137 GMT - The cost of insuring euro credit against default using credit default swaps falls as sentiment improves on relief at Wednesday's slightly more benign U.K. and U.S. inflation data. Additionally, several major U.S. banks on Wednesday posted impressive earnings results. Altogether this "offered an almost ideal news flow for global investors," Swissquote Bank's Ipek Ozkardeskaya says in a note. The iTraxx Europe Crossover index which tracks euro junk bond credit default swaps falls 3 basis points to 306bps, S&P Global Market Intelligence data show. The iTraxx Europe Main index which tracks euro investment-grade CDS falls 1 basis point to 55bps. ([email protected])1133 GMT - The Bank of England may not have been surprised by U.K. GDP growing just 0.1% in November, having forecast no growth in the fourth quarter, HSBC economists Elizabeth Martins and Emma Wilks say in a note. However, if the bank concludes that weaker growth and employment will reduce inflation, then it might opt to remind the market of this at its next meeting and forecast update on Feb 6, they say. Inflation for December came in at 2.5%, slightly lower than expected. Moreover, if the market moves to pricing more rate cuts, that might provide some relief for the government's fiscal position too, a reversal of the "doom loop" when yields rise, the economists say. ([email protected])1030 GMT - The global economy is being pulled in two directions heading into 2025, and the volatility seen in recent years is likely to persist given considerable policy uncertainty on the horizon, Export Development Canada's Stuart Bergman says. The chief economist at Canada's export credit agency notes the world faces challenging economic conditions, with the exception of the U.S. which is still proving durable. Global growth is projected to be 3.1% in 2025, followed by a still below-potential 3.2% expansion in 2026. Bergman one additional space where the U.S. is expected to be an exception is on the policy front, including regulatory, fiscal and trade policy, and in its adherence to global trade norms and conventions. ([email protected])1030 GMT - The outlook for Canada's economy remains subdued this year, with growth expected to be 1.8%, Canada's export credit agency forecast. Price Owusu, senior economist at Export Development Canada, says Canadian consumers continue to be exceptionally pessimistic despite easing inflation and the Bank of Canada cutting rates five times since June. That has led households to build savings and has slowed consumer spending. Owusu says businesses have matched the pessimism and investment has consistently lagged. Still, EDC expects a gradual and modest increase in consumer spending as lower interest rates reduce the burden on consumers, while major projects such as the final stages of building LNG Canada's export terminal and spending on electric vehicles and batteries will support business investment. ([email protected])1030 GMT - The Bank of Canada, the first G7 central bank to start cutting rates back in June, could be among the first to stop cutting, Export Development Canada chief economist Stuart Bergman suggests. Weakness in Canada's economy prompted aggressive action by the Bank of Canada. Now with inflation tamed and forecast to average 2.1% in 2025, closing a widening output gap and arresting the deterioration in the labor market will be the bank's main priority, Bergman says. The country's export credit agency expects the BoC to cut rates three times this year, reaching a target rate of 2.75% by September. It also expects the Canadian dollar to average $0.70 in 2025, put under pressure by a weaker Canadian growth outlook and expectations the Fed will be cautious about rate cuts amid policy shifts in the country. ([email protected])1048 GMT - Sterling could stay under pressure in the near term after U.K. economic growth data Thursday missed expectations, Monex Europe analysts say in a note. The data showed the economy grew 0.1% month-on-month in November after a 0.1% contraction in October but was below the 0.2% growth expected by economists in a WSJ survey. In the absence of further U.K. data Thursday, sterling will remain on the back foot in the near term, Monex analysts say. The currency remains vulnerable given concerns about U.K. fiscal policy and rising U.K. government bond yields, they say. GBP/USD falls 0.4% to 1.2200. EUR/GBP rises 0.3% to 0.8431. ([email protected])1021 GMT - The gilt market faces increased volatility in the near term due to uncertainty around the pace and magnitude of Bank of England interest-rate cuts, Charles Stanley's Rob Morgan says. Weak U.K. GDP growth could cause the BOE to cut interest rates at a faster pace than markets expect, Morgan says. However, this isn't certain. U.K. inflation risks remain as major retailers have warned they could raise prices. Potenially, this could mean the BOE keeping rates at elevated levels, he says. Gilt yields surged to multi-year highs last week, then fell sharply on Wednesday after below-forecast U.K. inflation data. The 10-year gilt yield is last up 1 basis point at 4.722%, Tradeweb data show. ([email protected])0952 GMT - Bitcoin eases after briefly returning above $100,000 following an unexpected fall in U.S. core inflation data Wednesday. The softer-than-expected inflation data and renewed optimism over potential crypto-friendly policies from U.S. President-elect Donald Trump boosted bitcoin earlier, Saxo Bank analysts say in a note. While bitcoin has returned below $100,000, analysts remain optimistic about further gains. Bitcoin falls 0.9% to $98,816 after hitting a one-week high of $100,805 overnight, according to LSEG. It reached a record high of $108,379 on December 17.([email protected])0933 GMT - The U.K. is likely to find it difficult to meet 2025 growth expectations after the slow growth in recent months, Berenberg's Andrew Wishart says in a note. Thursday's U.K. GDP data show the economy expanded by 0.1% month on month in November, while average growth in the three months to November was flat compared with the three months to August. "The smaller than anticipated 0.1% increase in GDP in November confirms that meeting the consensus GDP forecast of 1.4% in 2025 will be extremely challenging," he says. ([email protected])0912 GMT - A limping U.K. economy makes more rate cuts at the Bank of England likely, Investec economist Sandra Horsfield writes in a note to clients. The economy returned to growth in November but at a rate weaker than had been expected, figures showed Thursday. That means the BOE's policymakers will need to take more seriously the prospect of a disappointing performance in economic activity this year, Horsfield says. The BOE looks set to cut rates by 25 basis points at its meeting early in February, followed by a further three cuts by the end of the year, according to Investec's projections. "Below-potential growth adds to spare capacity and should, in the medium term, weigh on inflation," Horsfield says. "Tighter financial conditions from higher bond yields do the same."([email protected]; @joshualeokirby)