1 Minute Market Rundown – 11th August 2022

We Have Lift Off
US CPI Surprises to the Downside
Fed to Pivot?
Crypto Delights

Well the US CPI print yesterday provided the spark this market was screaming out for. Core inflation which was expected to be higher came in at 0.3% v 0.5% expected. Digging into the numbers it looked like transportation costs came in significantly lower to help weigh on inflation.

I wrote yesterday of a market that seemingly wanted to buy risk but was nervous and needed encouragement. A market that has been sitting on cash. A market that has been looking for when the FED will reach peak hawkishness. A market that was trying to foresee when the FED would look to pivot. Well the CPI data gave the market what it needed. Risk flew as expected as the front end of the yield curve got some much needed respite. For those who have been reading this note, you will know that I have been reluctant to call a low in risk until I saw inflation data tick off. Now whilst one swallow doesn’t make a Summer, I am now constructive of risk and have started scaling into long equities, short usd and re-establishing tactical longs in crypto. I am not going quite gung ho yet because the FED is still battling wage inflation and key inflation indicators like rent are still running high and so the data needs to be watched very closely to make sure yesterday wasn’t just an outlier.

Crypto markets were buoyed as risk sentiment turned positive in the wake of the data release. I wrote quite a detailed explanation of my view on crypto yesterday and my reasoning for going long BTC, short ETH and my view is that much stronger following the CPI print. If one was to believe risk will now do well, then one also should think that BTC is rather undervalued at these levels. BTC is approaching a key resistance level at $25,200 and a break above should see the pair extend another leg higher and target the $30,000 level. You all know my views on ETH and for someone who has been long for nearly 8 years now, I must stress it is purely short term and tactical. I just believe the merge is getting priced in and there will be a nice dip in and around September 19th that I will look to take profit into and flip long. Resistance for ETH now comes in around $2050/2100.

As a desk we are currently running long EUR/USD and short ETH/BTC.

Good luck all.

Lux Thiagarajah – Head of Markets

1 Minute Market Rundown – 11th August 2022

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