April 22, 2024

Market run-through

From the data that the ONS released last week in the UK, we learnt that inflation, despite the Government’s wishes and claims, is still sticky, with services sticking around three times the BoE’s target level with the ongoing conflict in the Middle East damaging supply chains and looking potentially set to worsen the outlook for prices to stop rising looks bleak. Adding petrol to the flames of inflation is the increase in wages in the UK and annual hikes in such prices as state pensions and mobile phone bills. As wages rise, we all feel a little more prosperous, perhaps reflected in the stronger-than-expected retail sales figures released on Friday. The other side of the coin is the increase in unemployment in the UK, which leaves the Bank of England boxed in regarding interest rate cuts.

Across the Atlantic, the US Federal Reserve is also wary of a return of inflation and, having dismissed the first jump a couple of years back as transitory, is in no mood to make the same mistake again. At long last, the stock markets are taking the Fed’s warnings of higher for longer to heart and are showing signs of weakness. We have to wait till Friday for this week’s highlight on the data docket when the latest PCE (Personal Consumption Expenditure) data is released in the US. With money supply still expanding and employment looking healthy, the number could well surprise on the upside, giving the greenback a further boost. As we mentioned earlier, the conflict in the Middle East shows no signs of abating, and until it does, it will be a significant driver in the markets, and traders will stay conscious of risk.

Richard Matthews, Head of FX and Payment Partnerships

Behind the desk

The Bitcoin halving has reached its conclusion, coinciding with a surge in BTC transaction fees, peaking at $240 per transaction. This spike is attributed to Runes, a novel Bitcoin protocol introduced by the developer known for controversial NFTs-on-bitcoin projects. Runes aims to enable the issuance of fungible tokens, akin to memecoins like dogecoin, on the Bitcoin network.

Amidst the halving, speculation on price predictions has been a thrilling aspect for many. Distinguishing between “outrageous” projections and realistic outcomes in this dynamic space remains challenging, given Bitcoin’s penchant for surprises. However, the heightened attention on Bitcoin during this halving is undeniable, fueled by various factors such as renewed interest in its developer ecosystem, the relocation of the U.S. mining industry post-China’s ban, and the recent introduction of spot Bitcoin ETFs, which sparked a market rally.

For me, Bitcoin purchases remain a viable option. On the trading desk, we’ve noticed a modest uptick in BTC buy orders. While the trajectory of this bull market remains uncertain, historical patterns suggest that new all-time highs are plausible. Although alternative coins haven’t experienced the same level of bullish momentum as in previous cycles, it’s premature to dismiss them entirely. Despite recent sell-offs in altcoins, I’m inclined to consider buying and holding, anticipating increased volatility spurred by Bitcoin’s momentum.

As another crypto event unfolds, the palpable anticipation lingers, with only time holding the answers. Nevertheless, my stance remains bullish—every buy opportunity holds potential at this juncture.

Alex-Desmond Brathwaite, Senior Trader

Chart of the week

As most may already be aware, I don’t tend to place particularly much weight on technical analysis; in many ways, it is akin to astrology, only for financial markets! That said, one thing I do see value in paying close attention to is moving averages, particularly given their use by many trend-following institutional desks, which attaches extra significance to these levels. In light of this, the S&P 500 sits in a very interesting spot at present, having tested, but bounced to the upside of, its 100-day moving average into the close on Friday, as another bout of pre-weekend de-risking hit financial markets amid ongoing geopolitical tensions in the Middle East. While the medium-term outlook remains positive, with the policy backdrop and return of the ‘Fed Put’ likely to remain positive catalysts, the data docket is now relatively quiet until the next FOMC on 1st May, with earnings taking centre stage, as around 40% of the S&P’s market cap report in the coming 5 days. In light of this, if the 100-day MA were to give way (on a closing basis), the near-term balance of risks would likely point to further downside potentially being on the cards, especially as those aforementioned trend-followers close out longs, and flip short.

Michael Brown, Market Analyst at Pepperstone

Disclaimer: The views contained herein are not to be taken as a recommendation or advice. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on ONE’s website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. It should be noted that investment involves risks, the value of investments may fluctuate in accordance with market conditions and investors may not get back the full amount invested.

Not all ONE services may be available to UK customers.