Crypto steady awaiting momentum

This Daily Digest will cover:

• Crypto steady awaiting momentum

• USD strengthens in an orderly fashion

• Fed speakers hawkish thus far this week

• OK, I will reluctantly talk about the debt ceiling

On Monday I talked about how the markets were lethargic and lacking direction. Well frankly nothing has changed and risk reduction remains the key theme as the USD bounces back from a tough start to the year. EUR/USD is trading 1.0835 as I type having failed at the flagged supply overhang yesterday above 1.0900. US yields are ticking higher as a full roll of Fed speakers this week have thus far been hawkish. The key speaker as always is Jerome Powell who speaks on Friday and frankly matters. One thing that caught my eye yesterday was Canadian inflation that was expected to fall but actually rose. They have been slightly ahead of the U.S with their cycle so there is reason to be fearful that they could be showing the way…

Crypto remains quiet and can be read glass half full or empty depending on your view. Holding onto the recent bounce and consolidating before another leg higher if you are bullish, or unable to build on a fairly weak bounce if you are bearish. Frankly we need fresh news or impetus before we can get going again and PEPE is not going to provide it!

What may provide the impetus, and I stress may, is the debt ceiling issue that is on the horizon. I have consciously not discussed this as it is a red herring that I have encountered so many times in my career that it bores me. However, it would be remiss not to briefly muse on the situation. June 1st is when Yellen has suggested the government will run out of money without the debt ceiling being raised. This won’t happen, and a deal will be fudged just before or briefly afterwards – it always does, and always will, once the ridiculous political posturing is finished. The worst case is a short term Government shutdown which has happened before but generally under slightly crazier leaders than Biden. Stocks and risk may stay offered as we get towards the end of the month as the fear increases but any sell off will not last (at least not because of this issue) as it will be resolved.

I promise I won’t mention it again…

As always, good luck.

Richard Usher
Head of OTC Trading