The key inflation indicator, the U.S. core PCE for April, came in at 0.2%, below the expected 0.3%, resulting in a significant but temporary sell-off of the U.S. dollar. However, the dollar subsequently saw a strong rebound. We successfully capitalized on the flow of the U.S. dollar and generated profits.
In the end, the market remained in a range-bound state, with neither side breaking out decisively.
As we approach the FOMC meeting on June 11-12, the blackout period, during which U.S. officials cannot comment on monetary policy, begins. From June 3, market movements will likely hinge on the outcomes of U.S. economic indicators, making for a potentially volatile week.
Key Focus Areas Moving Forward
1. USD/JPY Strengthening Towards U.S. Employment Data; Intervention Concerns at 157 Yen
Next week, USD/JPY is expected to strengthen ahead of the U.S. employment report on June 7. FOMC members have shown a cautious stance on rate cuts, which should support a strong dollar and a weaker yen.
However, at 157 yen, intervention by Japanese monetary authorities may become a concern. We could also see the yen strengthen in response to speculation ahead of the Bank of Japan’s monetary policy meeting.
(Source: Bloomberg)
Given the sensitive nature of USD/JPY, it’s important to monitor the differing interest rate expectations between Japan and the U.S. The possibility of up to two rate cuts in the U.S. this year remains, but rates could also be kept unchanged depending on upcoming economic data, making predictions challenging.
Key Economic Indicators to Watch:
During the blackout period for U.S. officials, economic data will take center stage. Key data points include:
June 3: May ISM Manufacturing Index
June 4: April Job Openings and Labor Turnover Survey (JOLTS)
June 5: May ADP National Employment Report and May ISM Non-Manufacturing Index
June 7: May Employment Report
The employment report, in particular, could significantly influence expectations for U.S. interest rates.
2. ECB Likely to Cut Rates in June Amidst Economic Slowdown and Easing Inflation
The European Central Bank (ECB) is expected to make a final decision on initiating rate cuts at its June 6 meeting. President Lagarde and other board members foresee continued moderation in inflation, making a rate cut likely. The prolonged economic slowdown, particularly in Germany, is also prompting a move towards easing monetary policy.
(Source: Nikkei)
A 0.25% rate cut is anticipated, but attention will be on the ECB’s statement and President Lagarde’s press conference. The outlook for rates beyond July remains uncertain, with statements potentially shaping the euro’s direction.
Other Currency Trends:
Canadian Dollar (CAD): Sell
A 0.25% rate cut is expected at the Bank of Canada’s meeting on June 5. Attention will be on the pace of further cuts.
Australian Dollar (AUD): Buy
The Australian dollar is expected to remain strong. April’s CPI showed an increase, and the RBA is considering a rate hike. The next RBA meeting will be closely watched.
Additional Notes:
On May 31, it was revealed that approximately 48.2 billion yen worth of Bitcoin was leaked from DMM Bitcoin. This incident is on par with the 48 billion yen Mt. Gox incident in 2014 and the 58 billion yen Coincheck incident in 2018.
However, the market impact this time is relatively minor compared to previous incidents. Although there was a brief drop, overall, the price movement has been insignificant.
The primary reason for this is the expansion of the market size. The market capitalization of cryptocurrencies was around $10 billion in January 2014 and has grown to $2.67 trillion as of June 1, 2024, an increase of 267 times. This growth means that the impact of a similar-sized incident is significantly reduced.
The number of cryptocurrency holders has also been increasing. According to Triple-A, the number of cryptocurrency holders has been growing at an annual rate of 34%, reaching 562 million people.
Global Crypto Ownership Reaches 562 Million People in 2024: New Report
Asia leads with 326.8 million holders, and South America has seen a massive 116.5% increase.
Europe and Africa have also seen substantial growth, with Europe increasing from 30.7 million to 49.2 million holders, a 60.3% increase, and Africa from 40.1 million to 43.5 million, an 8.5% increase. Oceania’s interest in cryptocurrencies has surged from 1.4 million to 3 million holders, a 114.3% increase.
This means that globally, more and more people are holding and using cryptocurrencies.
As the number of users grows, the value and utility of these currencies increase. This growth shows no signs of slowing down, and digital assets will likely continue to expand.
With countries worldwide considering moving away from the U.S. dollar as the reserve currency, cryptocurrencies may increasingly serve as a viable alternative over the next 10-20 years.
Have a great weekend! 😊
