By Francisco Rodrigues (All times ET unless indicated otherwise)
It’s Federal Open Market Committee day in the U.S., and while there’s little expectation of a change in interest rates, the market’s attention will be focused on Federal Reserve Chair Jerome Powell’s comments at the FOMC’s press conference.
The CME’s FedWatch tool is pointing to a 97.6% chance of rates remaining unchanged and Polymarket traders are weighing a 98.3% chance, so it’s the outlook that will take center stage.
Spanish bank Bankinter said in a note that a potential rally attempt for risk assets would for now be “naive,” pointing to indicators showing main U.S. ports are seeing a reduction in containers from China, while Powell is “likely to strike a chilly tone on both future cuts and the inflation cycle.”
“We are entering a phase of unclear direction, probably sideways but with a weakening bias that may last for several weeks,” Bankinter analysts wrote.
Adding to the cautionary tone is the military flare-up between India and Pakistan. India’s “Operation Sindoor’ kicked off during Asian hours with strikes in parts of Pakistan, which has vowed to retaliate.
Still, spot gold retreated more than 1.7% as traders took an optimistic stance on a U.S.-China trade deal and cryptocurrency prices are rising after New Hampshire became the first state to allow the investment of public funds into crypto. Bitcoin (BTC) has added 3% in the past 24 hours and the broader crypto market, as measured via the CoinDesk 20 (CD20) index, rose 2.57%. That’s in contrast with equity markets, which fell Tuesday.
It’s still too early to say whether markets will focus more on the need for safe havens as international belligerence ramps up, or on the desire to lock in a bit more volatility as trade tensions ease. One possible signal: The largest bitcoin ETF, BlackRock’s IBIT has attracted greater net inflows than the largest gold ETF, SPDR Gold Trust (GLD), since the start of the year.
Ethereum’s Pectra upgrade went live, the network’s biggest upgrade since 2022. The upgrade includes 11 major improvement proposals (EIPs), but whether it can reverse ETH’s decline against BTC remains to be seen.
Year-to-date, ether has lost around 47% of its value to the leading cryptocurrency, with the ETH/BTC ratio now sitting at 0.019. Stay alert!
