Sovereign Adoption of Bitcoin is Rising — Market Talk
1115 ET - Sovereign adoption of bitcoin is starting to take shape, TP ICAP's director of digital assets Hina Joshi says. El Salvador was the first to use bitcoin as legal tender and has significantly increased its investment in the cryotocurrency as part of its reserves, she says. "It's set a precedent, which other countries are now exploring." Trump signed an executive order establishing a bitcoin strategic reserve and stockpile for other cryptocurrencies in March. Pakistan also recently announced plans for a strategic bitcoin reserve. Indirect sovereign exposure to bitcoin is also growing with Switzerland, Norway, South Korea and Abu Dubai having increased holdings of bitcoin-treasury company MicroStrategy. ([email protected])1113 ET - Europe will have difficulty replacing lost U.S. demand should tariffs push up the price of their goods exports, Oxford Economics' Matt Swannell says in a report. The sheer size of the U.S. economy means it takes a large share of Europe's exports, particularly pharmaceuticals and autos. "This will make it difficult for Europe to switch to other markets," Swannell says. Europe will also face challenges in boosting exports by reducing prices, since European goods are already relatively expensive compared with Chinese, he says. While there is scope for fiscal policy to pick up some of the growth slack, fiscal rules could constrain the solution, he says. ([email protected])1101 ET - There is a "clear consensus" among investors that German fiscal policy will be the primary catalyst for improving European growth, Bank of America's European Fund Manager Survey for July shows. A total of 85% of investors cite German fiscal stimulus as the most likely source for growth, up from 79% in June, the survey shows. A total of 26% of investors also consider eurozone fiscal stimulus will be the biggest positive factor for overall global growth, ahead of those who cite U.S. policy support. ([email protected])1059 ET - Treasury yields recover after weakening on June inflation data. CPI accelerated last month in line with forecasts, amid signs that tariffs could be lifting some prices. Yields declined initially on the data, but a bonds selloff set in later. Analysts saw the report as supporting the Fed's wait-and-see approach. Meanwhile, Treasury Secretary Bessent says the process to find Fed Chair Powell's replacement is under way. The 10-year is now at 4.473%, on path for its highest settle since early June. The two-year is at 3.944%. ([email protected]; @ptrevisani)1040 ET - Stablecoins could prove effective in international transactions but they aren't a long-term store of value, TP ICAP's director of digital assets Hina Joshi says. "Stablecoins solve a lot of the problems that we see in international payments such as high fees, low settlement times and lack of transparency," she says. However, the cryptocurrencies are tied to government-issued currencies, which lose value over time due to inflation. That means stablecoins will gradually lose purchasing power in the long run, she says. ([email protected])1035 ET - Fed officials use the personal-consumption expenditures price index to track inflation, and they look to the core version, which excludes food and energy prices, to get a sense of the underlying trend. Using data from the fresh June CPI report, economists are estimating that core PCE inflation likely held steady around 2.7% or perhaps ticked up to 2.8% in June. That will mean another month of the underlying trend making no progress toward the 2% target. Core PCE inflation hit a recent low of 2.6% in April, but ticked higher again in May. Now it looks like, at best, it stayed put in June. Economists will refine their estimates of PCE inflation after getting wholesale-price data Wednesday. ([email protected]; @mattgrossman)1033 ET - While downside risks to economic growth in Canada persist, recent data fits Royal Bank of Canada's base-case view that the Bank of Canada won't cut interest rates again this cycle, economist Abbey Xu says. The central bank has already opted to skip cuts at its last two meetings. Xu says it remains too early to determine whether recent increases in auto and grocery prices are fully attributable to tariffs. The bulk of upward pressure on prices in recent months has come from domestically produced services, excluding shelter, that are more reflective of domestic consumer demand trends than external factors, the economist adds. ([email protected]; @RobbMStewart)1030 ET - Canadian inflation is still too hot, so rate cuts will have to wait, says Manulife Investment Management's Dominique Lapointe. He says that while the Bank of Canada could reasonably look through the temporary price increases caused by counter-tariffs, it has been reluctant to do so given uncertainty around the full extent of the pass-through and the possibility of other inflationary forces at play. At the same time, Canada has yet to experience recessionary pressures that would compel the BoC to shift toward a more accommodative stance, Lapointe says. Still, Manulife reckons a continued rise in the unemployment rate, widening output gap, and greater clarity on the temporary inflationary impact of tariffs will eventually allow the central bank to implement two additional rate cuts in this cycle. ([email protected]; @RobbMStewart)1008 ET - Canada's inflation data rules out a rate cut from the Bank of Canada on July 30. Yet, further easing in the fall can't be ruled out, says TD Bank economist Andrew Hencic, as the economic backdrop in Canada at this stage remains weak. President Trump's renewed trade threats last week, outlined in a letter to PM Mark Carney, add to the uncertainty that has hovered over the economy this year, he says. Also crucial, he says, is whether additional data indicate that June's solid employment gain is the start of a trend or a one-off aberration; and whether officials in Washington and Ottawa agree on a new pact before Trump's Aug. 1 deadline to resolve the current tariff row between the two countries. ([email protected]; @paulvieira)1005 ET - Institutional investors are showing heightened sensitivity to counterparty risks in cryptocurrencies that could cause a sharp drop in prices, TP ICAP's digital assets director Hina Joshi says. This follows the collapse of the crypto exchange FTX in 2022 and crypto lender Genesis Global in early 2023, which led to sharp losses in bitcoin and other cryptocurrencies. Investors are seeking "clear asset protection mechanisms" to reduce their exposure to the potential losses stemming from such events, she says. ([email protected])1003 ET - The Canadian Chamber of Commerce expects the central bank will again hold its fire on interest rates later this month after price pressures edged higher and goods inflation picked up again in June, economist Andrew DiCapua says. He says the acceleration in inflation last month was mostly brought on by base effects from gasoline prices, but underlying inflation remains stubborn. This will weigh heavily on the Bank of Canada, especially as retaliatory tariffs begin to feed through and businesses warn of rising consumer prices, he adds. ([email protected]; @RobbMStewart)1000 ET - There were signs of upward pressure on Canadian consumer prices from tariffs last month, though the impact appears marginal so far, says Oxford Economics' Michael Davenport. He notes Statistics Canada attributed a jump in year-over-year clothing price inflation in June to "trade uncertainty" amid higher costs from tariffs, while upward pressure on durable goods prices likely also reflects tariff-related factors. Still, food price inflation slowed in June despite ongoing Canadian counter tariffs on U.S. food product. Davenport says with trade uncertainty high and core price pressures likely too firm, he expects the Bank of Canada to hold its policy rate steady this month. ([email protected]; @RobbMStewart)