In today’s briefing:
- The Dollar Smile Theory Explains USD Strength Heading Into Final Central Bank Meetings For 2023
- Taking the Bitcoin Halvings Out of Isolation
- 5 Things We Watch – Liquidity, Bond positioning, Oil, Consumer spending & Rates
- CX Daily: Will Hong Kong’s Tax Tweaks End Its Real Estate Slump?
- UK Private Debt Looking Less Burdensome
The Dollar Smile Theory Explains USD Strength Heading Into Final Central Bank Meetings For 2023
- DXY is up 1% in Dec after a 3.7% decline in Nov. USD strengthening indicates portfolio positioning & dollar hedging going into final policy meetings for the year.
- The US Fed is expected to hold rates steady. Markets anticipate rate cuts as early as March 2024. USD will remain strong backed by bullish equities & policy divergence.
- Fed officials signal peak rates for now but remain hawkish with clear warnings against premature rate cut bets by markets.
Taking the Bitcoin Halvings Out of Isolation
- Even though the number of observations is limited, we believe looking at the broader picture surrounding previous Bitcoin halvings provides valuable insights.
- For example, all previous halvings occurred during equity bull markets, modest GDP growth, mild inflation, and easy or easier Federal Reserve monetary policy. Similar circumstances are on the horizon.
- Declining Bitcoin supply, because of the halving and the rise of long-term investors, combined with the approval of US spot Bitcoin ETFs will likely become this halving’s catalyst.
5 Things We Watch – Liquidity, Bond positioning, Oil, Consumer spending & Rates
- We’ve spent the past 2 days in London, meeting clients and hedge funds, and there was a lot of support for the idea/notion that SOFR-Fed Funds spreads reveal that USD Liquidity is not ample and that the Fed will have to end QT early.
- The spread widening in SOFR – Fed Funds, caught a lot of attention over the past few days and it is interesting how swiftly the market jumps to the conclusion that it will lead to the Fed panic-ending QT already in Dec or January.
- Why are SOFR – Fed Funds spreads widening and how do we deal with it?
CX Daily: Will Hong Kong’s Tax Tweaks End Its Real Estate Slump?
- Hong Kong / In Depth: Will Hong Kong’s tax tweaks end its real estate slump?
PMI /: China services activity picks up momentum on stronger demand, Caixin PMI shows
Index /: Caixin China New Economy Index falls on lower capital inputs
UK Private Debt Looking Less Burdensome
- The BoE’s financial stability report updated its projections for how the debt burden will increase with the transmission of past interest rate rises.
- Although debt servicing costs will consume more income, the share of households with high cost-of-living adjusted debt servicing ratios no longer rises from current lows.
- Corporate earnings growth also reduced the proportion of firms breaching vulnerability thresholds. Monetary tightening is not delivering the brutal shock many feared.
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