Bitcoin Back above 5K
FOMC Minutes restore confidence
Madrid Issues Ultimatum to Barcelona
Bitcoin made another record high and broke its previous record high of $5000. It is up nearly 74% from its previous low of $2975 and up today nearly 5.57% (at the time of writing this article). There are many things which are behind the move such as Amazon thinking of adding Bitcoin as a form of payment, Goldman Sachs exploring the idea of adding bitcoin desk and geopolitical tensions.
Traders are optimistic on the back of the FOMC minutes as it was confirmed that the Fed is committed to its current stance towards its monetary policy. As long as the economic outlook doesn't deteriorate, the Fed is confident that another rate is likely by the end of this year. The minutes stirred confidence for investors. The reason is that the Fed isn't concerned about the harmful effects of all the hurricanes and classified them as transitory. For the equity investors, an increase in the interest rate on the back of the stable economic outlook warrants them to continue to invest in riskier assets.
In simple terms, the recent economic outlook hasn't changed the Fed's stance towards the monetary policy and the FOMC minutes did provide the same message that the market was expecting. However, this isn't to say that there is a perfect harmony amid the Fed members, because some of them are little concerned about the inflation equation. Charles Evan, the Chicago Fed, and Minneapolis Fed, Neil Khaskari's, both think that inflation is too soft and hold a contrasting view to the other members. This confirms that the pace of the interest rate hike going into 2018 may not be the same. This has taken the wind out of the dollar index. Basically, the Fed's inflation target still appears to be out of reach. Moreover, the ongoing sparring between President Trump and Senate Republican Bob Corker about the tax overhaul is maintaining the resistance on the dollar index.
The Spanish government's response to Catalonian President's action was a little tougher than anticipated. Perhaps his agenda is to make sure that Catalonians understands very well that Madrid has the ultimate power and they aren't going to leave the country. The Spanish Prime Minister Mr. Rajoy demands a clear answer from the Catalonian leader on declaring a deferred independence. Catalonians have five days to respond and if they do confirm that the independence has been declared and it is implemented, then we should prepare for a dire situation in the market. Triggering the article 155 of the Spanish constitution would bring nuclear waves in the Spanish political system. This would be a no-win position for both parties.
Investors would be focused on the US banks mainly as Wall Street giants report their earnings. JP Morgan and Citigroup will report their earnings before the New York open and the consensus in the market is for a soft number from them. The main focus would be on the trading volume and their loan growth. Any deterioration in their credit quality would be unwelcomed by investors and their stock price could come under pressure.