Markets

More dollar strength pulled EUR/USD to a first 1.05-quote since October 2023, but that level triggered some rebound action higher. It’s only a matter of time though for a test (and potential) break of the 1.0448 range bottom in place since 2023. Next support levels stand at 1.0406 and 1.0201 which are respectively 50% and 62% retracement on EUR/USD’s bounce from 0.9536 to 1.1276 in 2022-2023. The trade-weighted dollar touched 107 with the 2023-top at 107.35 being the near-term technical reference. USD/JPY changes hands at 156, making way to the 160 potential intervention area. The Ministry of Finance conducted FX purchases both in April and in July after passing this threshold.

Fed governor Kugler – labelled amongst the most dovish FOMC members together with governor Cook, Chicago Fed Goolsbee and Philly Fed Harker on Bloomberg’s hawk-dove spectrometer – said that the Fed must focus on both inflation and jobs goals. “If any risks arise that stall progress or reaccelerate inflation, it would be appropriate to pause our policy rate cuts,” she said. “But if the labor market slows down suddenly, it would be appropriate to continue to gradually reduce the policy rate.” Kugler’s comments seem to be skewing to the upside inflation risks (stubborn housing inflation and high inflation in certain goods and services) which obviously carries some weight given her more dovish status.

US eco data played second fiddle with weekly jobless claims and producer prices squeezed in between yesterday’s CPI data and tomorrow’s retail sales. Weekly claims continue to hover at low levels (217k from 221k). Headline PPI rose by 0.2% M/M as expected, following an upwardly revised 0.1% in September. Core PPI excluding volatile food and energy categories climbed 0.3% M/M and 3.1% Y/Y (vs consensus of +0.2% M/M and 3% Y/Y). Both services costs and goods prices rose by 0.3% in October. The data triggered a tick lower in US Treasuries, but the magnitude was smaller than the past days’ declines and like in the dollar was met with a countermove following one-way traffic.

Daily changes on the US yield curve currently range between -5.9 bps and -3.6 bps with the wings of the curve outperforming the belly. German Bunds outperformed again, especially at the front end of the curve (2-yr yield -5.6 bps). We retain some interesting comments coming from Minutes of the October ECB meeting, pointing out that the disinflationary process was gathering steam with initials improvements in services as well. The ECB stance might approach neutral levels earlier than thought, cementing at least another 25 bps rate cut in December.

News & Views

In its November monthly report the International Energy Agency (IEA) forecasts world oil demand to rise by 920k b/d this year and just shy of an additional 1m b/d in 2025 (2024 102.8 mb/d, 2025 103.8 mb/d). The slowdown in growth from recent years reflects the end of the post-pandemic pent-up demand and below-par underlying global economic conditions, as well as clean energy technology deployment, the IEA assesses. This slowdown in growth compares to a growth of close to 2m b/d last year and 1.2 m b/d on average over the 2000-2019 period. 

Regarding the demand-supply balance, the IEA expects ongoing healthy supply growth. It expects non-OPEC supply growth at 1.5m b/d this year and next year, mainly driven by US production alongside higher output from Canada, Gyana and Argentina. OPEC+ postponed a scheduled increase of 180k b/d earlier this month and will reassess its policy at a meeting early December. However, even in a scenario where OPEC+ cuts remain in place, IEA expects global supply to exceed demand by more than 1m b/d next year.

Polish GDP growth unexpectedly contracted by 0.2% Q/Q in Q3, bringing the Y/Y-growth to 2.7%. Q2 growth was strong at 1.2% Q/Q and 3.2% Y/Y. The consensus expected Q3 growth at 0.3% Q/Q. The office didn’t release any details yet. A more in depth/detail release will be published on November 28. Poor retail sales data suggest a weak performance of private consumption. The National Bank of Poland recently indicated that uncertainty on the path of inflation probably will provide little to no room to cut the policy rate before March next year. MPC member Wnorowski today reconfirmed that the NBP could start to discuss rate cuts in Q1. Even so, the Polish 2-y yield today declined slightly more than regional peers (- 8 bps to 4.98%). The zloty held strong as EUR/PLN eased from near 4.3325.

Source: KBC Bank

Market Picture

Cryptocurrencies continued to surge, pushing the total capitalisation of this market to a new high of $3 trillion. It was just $2.2 trillion on November 5th. In other words, over 10 days, the increase was more than 35%.

Bitcoin has gained nearly 20% since the start of the week, barely slowing at the $80K mark. It wasn’t until it approached $90K that we saw any significant shakeout of positions. On Wednesday, Bitcoin stormed to $93K, but after 4 hours, it was at $88K. We also saw a similar intraday range of over 5% on Tuesday.

At these levels, more and more crypto enthusiasts are switching to looking for interesting altcoins as they lock in profits in the first cryptocurrency. The easiest choice is Dogecoin, which has gained over 200% from the lows of November 3rd to the present. Given bitcoin’s 60% share of the total crypto market capitalisation, which we last saw in 2021, the altcoin season has yet to begin.

Elon Musk has joined forces with former presidential candidate Vivek Ramaswamy to lead the US government’s new Department of Government Efficiency (DOGE). The idea for DOGE was first floated in August during Musk’s interview with Donald Trump. While it has nothing to do with the cryptocurrency itself, mentions of the word are supporting the rise in price of Dogecoin, which became the first major meme coin and was created as a joke.

News Background

Glassnode notes that realised profits for both short—and long-term holders of Bitcoin remain below previous peaks at the all-time high (ATH). In such circumstances, many investors are willing to wait for higher prices to lock in profits.

According to Bitwise CIO Matt Hougan, the first cryptocurrency will remain in the “early stages” and will only enter the maturity phase when it reaches $500K. Until Bitcoin equals gold and becomes a familiar asset for central banks and institutional investors, it will remain in the “early stage.”

ConsenSys CEO Joseph Lubin said Ethereum “stands to gain more than any other cryptocurrency” from Donald Trump’s victory in the US presidential election. He attributed this to ETH’s greater ‘maturity’ compared to its competitors.

The Italian government will increase the capital gains tax on cryptocurrencies to 28%, down from the previously proposed 42%. From 2023, the country’s citizens will be obliged to pay 26% to the state if the profit from cryptocurrencies exceeds €2,000.

Bitcoin traded near $90,000 on Nov. 14 as BTC price action digested yet another all-time high.

BTC/USD 1-hour chart. Source: TradingView

This came during the Wall Street trading session on the back of the latest United States inflation data. The October print of the Consumer Price Index (CPI) fell in-line with expectations of 2.6%, while nonetheless still increasing, the Bureau of Labor Statistics (BLS) confirmed.

US CPI 12-month % change. Source: BLS

Markets likewise continued to bet on another interest rate cut by the Federal Reserve in December, with the odds at over 80% at the time of writing, per data from CME Group’s FedWatch Tool.

Fed target rate probabilities. Source: CME Group

“Flow is pretty slow & declining volume during asia session, typically lines up with a move in EU/US session,” he noted.

BTC/USDT 15-minute chart with liquidity (Binance). Source: Skew/X

“Again, and again, we’re not at the peak yet! The index suggests that the top will be reached when the indicator falls within the 0 to 0.09 range—currently, it’s still at 0.27,” the post concluded.

Onchained Top/Bottom Index (screenshot). Source: CryptoQuant

Source: Cointelegraph

Soft landing, now almost a consensus

Trump 2.0, market consensus? 

A turning point in EM sovereign debt

Debt risks are shifting to DM

The narratives around distressed sovereigns remain idiosyncratic

Investors were enthusiastic about the higher likelihood of capital controls being lifted in Argentina, potentially with IMF support, while becoming more cautious in the short term on Ecuador as severe droughts and blackouts were thought likely to affect the February election outcomes (although market-friendly President Noboa still has a strong chance to win). Middle East volatility has renewed investor interests in Lebanon, as investors presume a likelihood that, with a weakened Hezbollah, the country would be finally able to form a government and eventually begin a restructuring process.

In contrast, the three largest European economies—Germany, France, and Italy—fell short of this benchmark, while the U.S. allocated 3.2% of its GDP to defence, surpassed only by Poland.

Source: Euronews