Risk wobbles but stays strong overall

This Daily Digest will cover:

• FOMC skip/pause but indicate more hikes coming

• Risk wobbles but stays strong overall

• Crypto the exception as the move lower gathers pace

All eyes were on the FOMC last night following Thursday’s fall in CPI. As broadly expected rates were held but the committee signalled further hikes are coming (likely in July) and the medium dot plot chart showed 2 more hikes before a pause. There was also an acknowledgement that rates will stay higher for longer than expected. This narrative was more hawkish than expected but a move up in the USD and lower in stocks was fleeting as the recent trends remained strong.

These moves have momentum and FOMO is real with cross yen being bought willy nilly and AI stocks powering ahead. FOMO is my only real justification for people buying stocks and risk assets at these levels in this environment. Nvidia is trading at 202 times its earnings. Justify these purchases when the stock falls at your peril. I suspect a nasty pull back is coming across asset classes, the question is when and timing the trade is proving almost impossible.

The exception to this narrative has sadly fallen, yet again, to the Crypto market. As flagged on Wednesday the overhang of supply remains and late last night Crypto took another lurch lower. It is hard to argue with the moves and the fact they are happening when broader markets are rallying is all the more worrying.

Chart of the day is BTC/USD. We are testing 25,000 and clearly in a short term downtrend. That said we are approaching 2 big levels on the charts. 24,000 is the first opportunity for a bounce, but a break opens 20,500 where serious questions will be asked around if a low is in place…

As always, good luck.

Richard Usher
Head of OTC Trading