Bitcoin Rises Amid Dollar Debasement Trade — Market Talk

0723 GMT - Bitcoin rises, staying close to multimonth highs, but remains below the $80,000 key level. The rise is driven by investors seeking alternative investments away from the U.S. dollar, also referred to as the dollar debasement trade, IG analysts say in a note. This trade is prompted by concerns about high levels of U.S. debt and the potential for prolonged inflation. Crypto currencies have also gained since the U.S. Treasury announced it will double its purchases of longer-term securities last week. Bitcoin climbs 0.5% to $78,811, although it remains well below Tuesday's three-month peak of $81,237, according to LSEG data.([email protected])0703 GMT - An uptick in food inflation is likely to benefit retailers Tesco, Marks & Spencer Group and Portugal's Jeronimo Martins, analysts at Bernstein say. The inflation acceleration is expected around the end of the third quarter or start of the fourth quarter, as oil price remain high and fertilizer supply is still disrupted, they say. ([email protected])0656 GMT - Eurozone government bond yields open slightly higher as focus switches to elevated gas prices rather than falling oil prices. "Natural gas has also overtaken oil as the primary inflation concern for European bond traders," Danske Bank's Jesper Fjarstedt says in a note. European gas prices are near five-month highs even as the price of Brent crude oil has declined on reports of an interim framework between Iran and Oman aimed at resuming safe shipping via the Strait of Hormuz, the senior analyst says. There is no bond supply in the eurozone on Thursday. The 10-year German Bund yield is up 0.7 basis points at 3.229%, according to Tradeweb. ([email protected])0630 GMT - The U.S. dollar trades steady in early European trade as investors await the Kansas City Federal Reserve's annual Jackson Hole meeting, starting Thursday. Fed Chairman Kevin Warsh is due to speak Friday. Investors are waiting to see whether Warsh provides a better understanding of what the Fed's thinking of monetary policy is, although expectations are low in a new era where forward guidance has been dropped. The DXY index, which measures the dollar's value against a basket of currencies, is unchanged at 99.145. ([email protected])0559 GMT - When thinking about the factors that drive inflation these days, it mostly boils down to AI spending, tariffs and energy, the Schwab Center for Financial Research's Kevin Gordon says. "The goods sector is where the latter two forces show up most, and here you can see how much the dynamic has changed over the past couple years," the head of macro research says after Wednesday's U.S. PCE data. In a posttariff world, it has been rare to see goods deflation--especially in the durable sector, which has historically mostly been in deflation territory, he says. "On the services side, it's normal to see inflation in any expansion; for now, it's the 'good' kind given the resilience in the sector and how much that is helping aid GDP growth." ([email protected])0544 GMT - The Kansas City Federal Reserve's Jackson Hole symposium is likely to be less about immediate policy decisions and more about understanding the longer-term direction of monetary policy, central bank thinking and the implications for investors, Isio Investment Management's Ajith Nair says in a note. "While markets will naturally be focused on interest rates, the bigger story this year is Kevin Warsh's first appearance at Jackson Hole as Federal Reserve chair and what it may reveal about his vision for the future of the Fed," the CIO says. One of the most notable shifts under Warsh's leadership has been his apparent desire to reduce the market's dependence on Federal Reserve forecasts and policy projections, and Jackson Hole could reinforce this approach, Nair says. ([email protected])0539 GMT - U.S. Treasury yields decline slightly, hand in hand with oil prices, in Asian trade, as investors turn their attention to the Kansas City Federal Reserve's upcoming Jackson Hole symposium following Wednesday's key PCE inflation data. "With core PCE holding at 3.3% year-on-year and the supercore re-accelerating, the pressure on [Fed Chairman Kevin] Warsh to signal a hawkish posture is real--but consensus remains that he will avoid a definitive policy commitment," Danske Bank's Jesper Fjarstedt says in a note. The 10-year Treasury yield falls 1.2 basis points to 4.652%, while the 30-year yield is down 1.3 basis points at 5.171%, according to Tradeweb. Brent oil falls 0.8% to $87.84 per barrel.([email protected])0527 GMT - The 10-year U.S. Treasury might face an uphill battle to fall below 4.50% any time soon, ING's Padhraic Garvey and Michiel Tukker say in a note. The U.S. Treasury has been victorious with the first battle against high long-end Treasury yields, "but there'll be more," say Garvey, regional head of research, Americas, and senior rates strategist Tukker. "All things considered, if the buyback plan is there to bully long-end yields lower on a structural basis, there is a war to be fought ahead," they say. Consequently, they don't see a break below 4.50% and "the pressure remains for a break higher to the 4.75-5% zone." They expect the 10-year yield to settle between 4.50% to 5% for now. ([email protected])0523 GMT - Markets will likely slightly increase their expectations of an interest-rate hike at the next Federal Reserve meeting in September, Syz Group's Reto Cueni says in a note. Syz Group, however, still expects a majority to forecast no rate hike for now, the chief economist says, adding that Syz Group doesn't expect a hike now either. "We stick for the moment to our outlook of no further Fed rate hike in the second half [of the year]," he says. Money markets assign a 65% probability of unchanged interest rates at the Fed's September meeting, according to LSEG. ([email protected])0515 GMT - The U.S. Treasury is expected to be more interventionist, pursuing incremental adjustments rather than dramatic changes to debt management, following the announcement of doubling long-end securities buybacks, Deutsche Bank strategists say in a note. "We also expect increased communication outside the quarterly refunding process, with Treasury using active signaling more extensively as a policy tool," they say. Treasury could leverage flexibility in the language of last week's announcement to increase long-end operation sizes beyond the initial suggested minimum of $4 billion, the strategists say. "Long-end buybacks regularly attract as much as $20 billion in offers, giving Treasury substantial scope to increase operation size in the near term." Treasury could also maintain operational flexibility by releasing its updated buyback schedule without specifying long-end operation sizes, they say. ([email protected])0506 GMT - Given Federal Reserve Chair Kevin Warsh's well-known scepticism toward forward guidance, investors should likely temper expectations of any meaningful hints on the future policy path, Impax Asset Management's Ross Pamphilon says in a note. "Instead, I would expect greater emphasis on inflation, productivity and labour market dynamics," the CIO of fixed income says. Warsh will need, however, to strike a careful balance, and this speech at Jackson Hole represents an early test of his communication strategy and credibility, Pamphilon says. "A message perceived as too dovish could trigger further [Treasury] curve steepening, weigh on the dollar and support gold. Conversely, a more hawkish tone risks prompting markets to price a September rate hike." ([email protected])0502 GMT - Federal Reserve Chairman Kevin Warsh's aversion to forward guidance is well known, and with another inflation report due before the September FOMC decision, "the timing isn't right for him to take a strident view," Russell Investments' Paul Eitelman says in a note. "We don't expect fireworks from Chairman Warsh's Jackson Hole speech this Friday," the global chief investment strategist says, referring to Warsh's speeach on Friday at the Kansas City Fed's annual Jackson Hole meeting. Warsh can talk about the task forces and big questions like AI, but the work of the task forces is incomplete, and the big questions are trodden ground for markets, Eitelman says. ([email protected])