Focus Sharpens on Fed's Disappearing Reverse Repo

Economic

Summary:

As the amount of cash parked at the Federal Reserve's overnight reverse repo facility (ON RRP) hurtles towards zero, the Fed's visibility on the minimum level of bank reserves needed to ensure the financial system functions smoothly also diminishes.

Once the banking system gets close to what is considered the 'lowest comfortable level of reserves' (LCLOR), the Fed is in murkier territory where credit conditions could suddenly be adversely affected, as happened in late 2019.

The daily RRP is sometimes seen as a gauge of excess reserves in the system and a barometer of how broader liquidity conditions are evolving. If it goes to zero, the Fed may be forced to tread more carefully in reducing its balance sheet.

At the current pace, the RRP balance will likely evaporate completely by the middle of the year. Many market participants and Fed officials see no problem with that, others are wary.

Focus Sharpens on Fed's Disappearing Reverse Repo_1

Two of the most influential U.S. central bankers have since addressed the issue publicly, and from slightly different angles.

Fed Governor Christopher Waller on Tuesday showed little concern about an RRP balance of zero: "There's no reason for it to have anything in it," he said at an event hosted by the Brookings Institution.

Dallas Fed President Lorie Logan, meanwhile, earlier this month said: "While the current level of ON RRP balances provides comfort that liquidity is ample in aggregate, there will be more uncertainty about aggregate liquidity conditions as ON RRP balances approach zero."

The two voices carry weight. Waller's views are generally thought to be pretty closely aligned to those of Chair Jerome Powell, while Logan was recently in charge of managing the Fed's trillions of dollars of Fed assets at the New York Fed.

Below $600 BLN and Falling

The RRP is often considered to be a proxy for overall bank reserves and liquidity in the system, and therefore a guide post for the Fed in terms of how it views the pace of reducing its balance sheet via quantitative tightening.

The RRP balance on Tuesday fell to $583 billion, the lowest since June, 2021. In June last year it exceeded $2 trillion, indicating that around $1.5 trillion of liquidity has been drained from the system in seven months.

Focus Sharpens on Fed's Disappearing Reverse Repo_2

Logan's remarks are a reminder that the Fed wants to avoid a repeat of 2019.

In September that year bank reserves dropped below the LCLOR needed to ensure the financial system plumbing functioned, repo rates shot up and the Fed was forced to halt QT and inject liquidity into the banking system.

The LCLOR is an unknowable number until it is breached and a moving target. Total bank reserves held at the Fed stand at $3.5 trillion, more than double September 2019 levels of $1.4 trillion but down from a peak of $4.3 trillion two years ago.

Deutsche Bank U.S. rates strategist Steven Zeng estimates that the RRP will continue falling briskly, by around $450 billion in the current quarter and down to zero by June.

"I don't see any need for concern - Fed officials mostly expect the RRP to go to zero. But they will have to take greater care in monitoring liquidity conditions to avoid a repeat of 2019," Zeng warns.

Cautious Approach

A more rapid decline might bring forward the timing of discussions around QT but not necessarily a change in policy or the pace of running down the balance sheet, at least not initially.

At the pace of contraction Zeng and others expect, it's not inconceivable that the RRP evaporates completely between Fed policy meetings. This is something officials would probably want to avoid, especially if they haven't already communicated their QT strategy to the market.

If the Fed errs on the side of caution, it may tie the pace of QT to the RRP, effectively automatically slowing the balance sheet runoff once liquidity is no longer quite so ample. Focus Sharpens on Fed's Disappearing Reverse Repo_3

Focus Sharpens on Fed's Disappearing Reverse Repo_3

Strategists at JP Morgan, on the other hand, believe the RRP should remain large enough in order to ensure there is no money market malfunction or liquidity shock, even if the 'LCLOR' is not under threat.

"There's a growing consensus that RRP balances enable smooth functioning in money markets, thus allowing the continued effective transmission of monetary policy," they wrote last week.

This is more in line with the latest New York Fed survey of primary dealers carried out before the Fed's Dec. 12-13 policy meeting.

It shows Wall Street's titans' median forecast is for the Fed to end QT in the fourth quarter this year, with total bank reserves projected to be $3.125 trillion and the RRP balance at $375 billion.

That's down significantly from a projected $625 billion in the October survey, but still comfortably above zero. Those taking a benign stance on the RRP may have that put to the test sooner rather than later.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Comments

Add to Favorites

Thomas

Economic

China's ageing population threatens key Beijing policy goals for the coming decade of boosting domestic consumption and reining in ballooning debt, posing a severe challenge to the economy's long-term growth prospects.

A record low birth rate in 2023 and a wave of COVID-19 deaths resulted in a second consecutive year of population decline, accelerating concerns about China's demographic downturn.

Large groups of the 1.4 billion people living in the world's second-largest economy will exit the labour pool and age past a prime period of their lives for consumption, exacerbating structural imbalances that policymakers have vowed to address.

Household consumption's share of economic output in China is already one of the lowest in the world, while many provincial governments - responsible for pensions and elderly care - are deep in debt as a result of decades of credit-fuelled investment-driven growth.

"China's age structure change will slow down economic growth," said Xiujian Peng,  senior research fellow at the Centre of Policy Studies (CoPS) at Victoria University in Melbourne.

In the next 10 years, about 300 million people currently aged 50 to 60 - China's largest demographic group, equivalent to almost the entire U.S. population - are set to leave the workforce at a time when pension budgets are already stretched.

The state-run Chinese Academy of Sciences sees the pension system running out of money by 2035, with about a third of the country's provincial-level jurisdictions running pension budget deficits, according to finance ministry data.

Low Retirement Age

China, which accepts few and only highly-skilled foreign workers, has one of the world's lowest retirement ages, at 60 for men, 55 for white-collar women and 50 for women who work in factories. A record 28 million people are scheduled to retire this year.

Employees at state-owned companies are typically mandated to retire when of age, while private employers rarely keep workers longer, whereas in some Western countries the retirement age is more flexible.

Unemployed Li Zhulin, 50, from the northwestern Shaanxi province frets about relying solely on her husband's pension of about 5,000 to 7,000 yuan ($697 to $975) per month when he retires in 2027 after a career at a state-owned company.

Li has been cutting back on expenses and scouring the internet for financial planning tips to try to be "less of a burden" for her only daughter.

"In addition to supporting her own family if she marries, she would also take care of four elderly people," Li said, including the husband's parents. "I can't imagine how difficult that would be."

Chinese society has traditionally expected children to support their parents financially as they age and often by living together to care for them.

But as in many Western countries, rapid urbanisation has shifted young people to bigger cities and away from their parents, prompting a rising number of seniors to rely on self care or government payments.

Whereas five workers supported every Chinese retiree in 2020, the ratio will decline to 2.4 workers in 2035 and 1.6 in 2050, estimates University of Wisconsin-Madison demographer Yi Fuxian.

"By that point, China's pension crisis will develop into a humanitarian catastrophe," Yi said.

Japan's ratio was 2 to 1 in 2022 and is projected to hit 1.3 to 1 in 2070 according to its government. But Japan was already a high-income economy before its population's ageing accelerated.

Ageing Consumers

China's second-largest group, about 230 million people aged 30 to 49, are in a prime period for consumption as their career is advanced enough to afford buying homes and cars and parents begin spending on child education.

Once the group reaches their 50s, their children will finish schooling and start earning their own income, meaning the cohort is expected to participate less in domestic consumption.

Their future replacement, currently in their 20s, is the smallest generation since the famines of the 1950s, a direct result of China's one-child policy from 1980 to 2015.

This bodes ill for China's property sector, which accounted for about a quarter of its economic output before its bubble popped in 2021 due to over-leveraged developers and excess supply of apartments, drawing comparisons with Japan's predicament in the 1990s before its lost decades of stagnation.

"Japan's experience shows that as the share of the working age population declines, so does demand for housing," said Larry Hu, chief China economist at Macquarie.

Innovation Woes

China saw a rise in births after ditching the one-child policy but the recovery was far off pre-implementation levels and also short-lived. Fewer children were born in each of the past eight years, including 2023.

Demographers say the number of children in any economy is directly correlated with domestic consumption.

Peng at CoPS says a shrinking domestic market will increase China's reliance on exports. With China already producing a third of the goods consumed around the world, it has redirected credit flows from property to manufacturing, in a bid to lift industries up the value chain and avoid the middle income trap.

But, Peng says, an ageing workforce "means they have less incentives to innovate, and a slower, not faster, productivity improvement."

($1 = 7.1821 Chinese yuan renminbi)

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Comments

Add to Favorites

Damon

Economic

Central Bank

As we embark on the journey through 2024, there is a perceptible sense of optimism in the air, given signs of a potential reprieve from the challenges that have defined 2023. Like most of the markets, I am also relatively optimistic about the year ahead, as the dissipating headwinds offer a glimmer of hope for improved conditions. However, I also believe that the road ahead is not without its twists and turns, for better or for worse. In this essay, I will delve into three pivotal events that I believe demand our attention in 2024, shaping the trajectory of economies, markets and global relations.

A focal point on the economic horizon is the anticipated policy shift by the US Federal Reserve (Fed) in 2024. Following aggressive rate hikes in 2022 and 2023, which sparked concerns of tipping the US into yet another recession, the Fed seems to now signal that it is ready to implement rate cuts this year. As we watch this unfolding narrative, it will be crucial to gauge how aggressively and how soon the Fed is willing to make these policy adjustments, and in turn how these actions resonate across markets and economies, both near and far. The lower the interest rates, the more boost it can provide to economic activity this year, which in turn will have positive ripple effects on the rest of the world.

Despite the incoming rate cuts, monetary policy conditions are likely to remain relatively tight as interest rates are projected to be above pre-pandemic levels this year. The latest projection material from the Federal Open Market Committee (FOMC) meeting in December points to three 25-basis-point rate cuts this year. Nonetheless, the jury is still out on the number of cuts. Fed officials are still divided on the policy outlook and the eventual policy decision will still depend on how the economy evolves. The possibility of additional rate cuts presents an opportunity for enhanced economic upliftment and will be one key factor influencing global economic conditions.

Three Things to Watch Out for This Year_1

The second focal point revolves around global trade, the engine that propels numerous economies, including trade-dependent nations like Malaysia. After a year of underperformance, which had left a huge dent in Malaysia's growth, the successful turnaround in global trade is a key factor to watch in 2024.

The International Monetary Fund (IMF) estimates a 3.5% increase in world trade volume this year, a significant improvement compared to the meagre 0.9% growth in 2023. Although global trade growth is still projected to trend below the 2000-2019 average of 4.9%, this is still good news for trade-dependent nations and is a beacon of hope for Malaysia's export-oriented economy.

The global economy's resilience will play a crucial role in determining the magnitude of trade recovery. With China's ongoing structural slowdown and shift towards a more domestic-oriented economy, the balance of contributions to global trade is evolving. On the other hand, the potential for a “soft landing” scenario in the US, as recently declared by Treasury Secretary Janet Yellen, adds another layer of consideration to the global trade dynamics.

The third crucial element to watch out for is the constellation of geopolitical events that could reshape global dynamics. Elections in the US and Taiwan will be pivotal, with potential ramifications for US-China relations and, consequently, the global economic landscape. Concurrently, existing geopolitical conflicts, such as the Russia-Ukraine war and the Palestine-Israel conflict, cast a shadow over global economic stability.

Recent disruptions in the Red Sea, near the Bab el-Mandeb Strait, also underscore the interconnectedness of geopolitics and the global supply chain. Houthi militants have been attacking commercial ships in the area, saying their attacks aim to support the Palestinians in the ongoing Israel-Gaza conflict. This has impacted maritime flow through the Suez Canal, a crucial global trade corridor that handles around 11% of global maritime trade. Unable to use the quickest sea route between Asia and Europe, ships are being forced to reroute around South Africa's Cape of Good Hope. This will likely lead to longer shipping duration, delays in deliveries and higher costs of transport.

In conclusion, as we reflect on the economic outlook, these three factors emerge as pivotal determinants of the year's narrative. The dynamic journey ahead requires us to stay attuned to shifts in policy, the dynamics of global trade and geopolitical flashpoints. However, I must emphasise that this is not a harbinger of doomsday scenarios but a reminder that economic recovery is multifaceted. Encouraging signs of improvement are evident and I have penned in a 4.5% to 5.5% gross domestic product projection for Malaysia this year, from an estimated 4.0% in 2023. By staying attuned, we equip ourselves with the foresight needed to navigate the complexities of the year ahead.

Source: The Edge Malaysis

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Comments

Add to Favorites

Cohen

Economic

2024 began with a significant and necessary movement in Germany. Farmers, backed by other self-employed workers and part of the transportation sector, initiated nationwide protests against the government. They blocked roads, brought hundreds of tractors to Berlin and engaged in various other forms of protest.

Germany, being the largest European economy, plays a pivotal role on the continent, and its activities often have a considerable impact on the rest of Europe. It is also a country where the population traditionally complies with the law.

Addressing Chancellor Merkel's legacy

The German government has unexpectedly faced an additional budget shortfall of 60 billion euros. To address this, Berlin increased the diesel tax for agricultural machinery, generating a total of 17 billion euros. Since the sale prices of agricultural products are politically regulated, farmers are unable to pass these additional costs on to consumers.

Throughout Chancellor Merkel's 16-year tenure, the German government committed several critical policy errors: they overlooked the maintenance of infrastructure, implemented a misguided immigration policy, pursued a detrimental energy strategy that increased reliance on Russia, neglected defense needs and eroded the core identity of Ms. Merkel's own Christian Democratic party. The current ruling coalition – the Social Democrats, the Liberals and the Greens – is now ineptly grappling with those challenges.

Despite having plenty of reasons for dissent, the German population remained largely compliant due to their cultural propensity for adhering to rules. Furthermore, Chancellor Merkel was adept at shaping public opinion, effectively portraying periods of stagnation and decline as if they were stability.

But now citizens have had enough, and this shift in sentiment is critical for Europe as a whole. People demand honest strategies, not merely feel-good leftist policies that are costly for the people. This sentiment is evident in many countries; President Macron in France even felt compelled to reshuffle his government as a response.

Germany is not just Europe's largest economy; its current state reflects a broader European mood of frustration and disenchantment with the political class.

There is an urgent need for people to make their voices heard. Given the excessive and often irrational regulatory environment, a certain level of civil disobedience looks increasingly necessary.

Chancellor Merkel was successful in conveying the message that she held Europe together. However, this was achieved without a clear strategy, relying instead on makeshift political solutions that could be costly in the long run. Her era was marked by the ability to present a facade of stability amid stagnation and decline.

The European Union, initially established as the guardian of a deregulated internal market, was and still is immensely beneficial for the continent. Up until the first decade of this century, it excelled in reducing government intervention in the economy and promoting competition. This led to significant economic and social achievements and united European countries, later including Central European nations that had broken free from Soviet control. Unfortunately, over time, a rise in technocracy transformed the member states and the Union into heavily regulated entities. Today, the EU proudly calls itself a regulatory superpower, but many of these regulations are overly complex and not fully considered, adversely affecting the bloc's competitiveness.

The outcomes of these policies are alarming: staggering deficits and debts, overly complex tax systems and declining productivity, all worsened by increasing compliance costs. Burdensome requirements such as supply chain reporting, upcoming ESG reporting obligations, the Digital Act and other similar measures heavily impede productivity and innovation.

The political establishment in self-proclaimed liberal democracies often undemocratically labels any form of protest as right-wing extremism. Not surprisingly, the arrogance and illiberal intolerance of the political elite and resulting public frustrations have fueled the rise of protest parties. The establishment attempts to marginalize these groups and portrays them as threats to democracy. But the real cause for concern is when democracies meet protests with intolerance.

Moreover, it has become common for anyone criticizing the EU to be quickly branded as anti-European or euroskeptic. This approach is akin to authoritarianism and counterproductive. By this standard, the entire French population would be considered anti-French, given how often they criticize their government.

The EU desperately needs deregulation and a reestablishment of the internal market. Unfortunately, the Covid-19 pandemic and the emphasis on accelerating the green transition have led member states, particularly France and Germany, to increasingly subsidize their economies, contravening the principles of the internal market. The reluctance of the political elite to embrace change necessitates protests and a certain degree of civil disobedience as catalysts for reform. This will help parties like the Christian Democrats, Conservatives and Liberals return to their foundational principles of entrepreneurship, free markets and fiscal discipline.

Strengthening Europe's role as a global player

When it comes to foreign and security policy, Brussels is noticeably absent. A lack of coordination and commitment among European governments has marginalized Europe in global security affairs.

The war in Ukraine should serve as a wake-up call to the need for a robust defense strategy. This can only be achieved through a coalition of major states, including the United Kingdom, Germany, France, Poland and Italy. Despite German Chancellor Olaf Scholz declaring a turning point in defense efforts nearly two years ago, little progress has been made. Nevertheless, Germany remains a key player in establishing a credible European defense.

Prospects for EU enlargement are limited. Despite high hopes for Ukraine and Moldova, significant developments are unlikely. The rebuilding of war-torn regions like Ukraine will be a major challenge but also presents an opportunity for Europe, especially if free trade agreements are established. This could potentially occur regardless of EU membership.

Europe's relationship with Africa is another complex area needing reevaluation. Africa, often perceived as poor and corrupt, is a continent with great potential. European development policies in Africa have largely been unsuccessful. Africa requires active European business engagement and access to the European market. Current European legislation imposes stringent standards on businesses operating in Africa, including extended responsibilities to their suppliers, which makes it difficult for European businesses to operate effectively.

Additionally, there is a lack of adequate investment protection. To foster development, supply chain standards need to be more realistic, and European foreign policy should focus on investment protection and trade. Lowering the EU's regulatory barriers would facilitate greater access for African products to the internal market.

Europe's global role is also affected by its internal challenges. Political issues in Europe are often reduced to mere technicalities within institutions. However, a broader change in attitude is required, encompassing more openness, tolerance and less moralizing arrogance. The frequent suppression of debates and the “cancellation” of ideas and opinions, often justified as defending democracy or avoiding offense, hinders progress. Europe needs to return to a more pragmatic approach to politics, which requires more knowledge, experience and courage, rather than a superficial adherence to values.

The current political and technocratic establishment in Europe is unlikely to break free from its self-destructive patterns. However, change is possible, as shown by the recent protests. These movements might lead to much-needed reforms.

The largest Christian Democratic Party in Europe, influenced by Angela Merkel's push for more leftist policies, has declined. However, there are signs of a return to more conservative principles. The Social Democrats need to recognize that the working population has evolved into a middle class and adapt its outlook accordingly. They have to move away from class struggle and “wokeism” and toward addressing middle-class interests. Chancellor Scholz's party and its coalition partners should focus on sound politics rather than trying to outlaw – against all democratic principles – a rival party, which, according to surveys, has nearly twice as much support as the Social Democrats in some regions.

Over the last 20 years, European democracies have gravitated toward increasingly intolerant technocracies, yet continue to self-identify as liberal democracies. This paradoxical situation has created a breeding ground for protest parties and even radical movements. Personal and economic freedom, self-responsibility, market economy and entrepreneurship are being increasingly constrained.

In a democracy, it is the citizens' duty to resist when governments infringe upon their rights and freedoms. Therefore, when political institutions become overly technocratic, protests and civil disobedience become not just options, but necessities. By being blindly obedient and compliant, the people betray the principles of democracy and freedom and become subjects.

The fundamental duty of political leadership in democracies is to ensure internal and external security and to protect the freedom and prosperity of the citizens. This requires accountable and competent politicians who understand the population and the economy. Above all, it demands determination and courage from both politicians and citizens.

Source: GIS

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Comments

Add to Favorites

Devin

Economic

British inflation edged up in December to 4.0% from November's 3.9%, according to figures released on Wednesday, but many economists think it could return to the Bank of England's 2% target by April or May, sooner than in other countries.

That would also be far earlier than the BoE forecast at the start of November when it predicted inflation would stay above target until late 2025.

December's surprise increase - which was driven largely by one-off effects from tobacco duty and air fares - comes after two months of much bigger-than-expected falls in the pace of price growth.

Here are more details about the outlook for inflation.

Why has inflation been falling?

British consumer price inflation peaked at 11.1% in October 2022, driven by surging European gas prices after Russia's invasion of Ukraine in February that year, as well as by higher food prices and lingering disruption from the COVID-19 pandemic.

Since then, oil and gas prices have fallen while food prices are increasing less quickly.

At the peak, household bills including energy costs were contributing nearly 4 percentage points to the inflation rate, food prices added 2 percentage points and transport more than 1 percentage point.

Now household bills and transport costs are generally falling and lowering inflation by 0.5 and 0.2 percentage points respectively.

Food price inflation remains high at 8.0% in December, contributing 0.9 percentage points the overall 4.0% increase.

How does UK inflation compare to other countries?

British inflation in December was just below France's 4.1% and above Germany's 3.8% and the United States' November reading of 2.1%, according to internationally comparable HICP measures provided by Britain's Office for National Statistics. Across the euro zone as a whole, inflation was also lower than in Britain in December at 2.9%.

For much of 2023, British inflation was rather higher than in other advanced economies, due in part to Britain's high reliance on gas for heating and power generation, and regulation that led to household energy bills rising and falling several months later than elsewhere.

When will UK inflation return to target?

Dutch bank ING and consultants at Capital Economics say British CPI will return to 2% in April - sooner than in the U.S. or euro zone, even after December's inflation surprise.

Citi, Deutsche Bank and Oxford Economics have predicted that inflation will fall to 2% or lower from the second quarter.

April is likely to see a 15% reduction in regulated energy tariffs which will lower the inflation rate by 1.5% while food price inflation is on track to slow towards 2%, ING predicts.

The BoE forecast at the start of November that inflation would average 4.6% in the final quarter of 2023 - compared with 4.2% in Wednesday's data - and exceed 3% throughout 2024. It will update its forecasts on Feb. 1.

What are the risks inflation doesn't return to 2%?

For the BoE, rapid wage growth is the biggest challenge to returning inflation to 2% and keeping it there.

Before the pandemic, when inflation stayed close to 2%, wage growth was typically around 3%. After it, pay growth accelerated, reaching nearly 8% in mid-2023, excluding bonuses.

Higher wage bills risk being passed on to consumers through higher prices. Surveys suggest many employers plan to raise pay by around 5% this year, while the minimum wage - a big influence on hospitality and retail pay - is due to rise by 10% in April.

Many economists expect inflation will edge up again in January, when a 5% rise in regulated energy tariffs took effect.

Disruption to shipping in the Red Sea, linked to the conflict in Gaza, could impact prices too though so far the impact on Britain's economy has been limited.

What does it mean for the bank of England?

Economists think lower inflation will allow the BoE to start cutting interest rates, probably from around the middle of 2024.

Financial markets see a 50-60% chance of an initial quarter-point rate cut in May, rising to a near certainty by June. They expect Bank Rate - currently 5.25% - to fall to around 4.25% by the end of this year.

The BoE's stance for months has been that interest rates will need to stay high for an "extended period".

BoE Chief Economist Huw Pill warned last year that big falls in inflation caused by lower energy prices should not make the central bank "declare victory prematurely".

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Comments

Add to Favorites

Chandan Gupta

Traders' Opinions

Cryptocurrency

Bitcoin has done very little during the trading session on Thursday, which is not a huge surprise considering that we had almost doubled in price in the very end of 2023. So, with that being said, I think you've got a situation where the market is just now trying to look for its next catalyst.Granted, the Bitcoin ETF was the major catalyst previously, but at the end of the day, everybody knew that, and once the SEC announced that they were going to approve the ETF, there was nothing else to move the market.Above, I see the $47,500 level as a major resistance barrier that will be very difficult to overcome. It's been important multiple times in the past.

So, it's not a huge surprise to see that we have pulled back from there. Underneath, we have the 50 day exponential moving average offer and support right along with the $40,000 level. Short-term pullbacks should be buying opportunities, but I also recognize that we may be stuck in a range for a while with that. I look at this between $47,500 and $38,000 as where we are going to be.

Breakdown Scenario

If we break down from here, I'm not overly concerned about the overall trend of the price of Bitcoin until we break down below the $35,000 level. The 200-day EMA underneath also would offer support, and it looks like it is going to reach that $35,000 level as well. Pay close attention to the bond markets because interest rates have a influence on Bitcoin, but really at this point, interest rates dropping does help Bitcoin, but they start to rise. That works against it right now. I think you're just in a state of flux trying to sort out what to do next.

At this point in time, everybody that was going to jump in and byy Bitcoin and of her fist has already done it, so I don’t think it’s a time to be overly aggressive at this point. The SEC has already done its job as far as approving the ETF is concerned, so now we need to find some type of reason for Bitcoin to become bullish again. A real-world use is probably something that’s going to be needed, something that has eluded Bitcoin so far for most of the world.

Bitcoin Seeks Momentum in Its Ongoing Quest for Sustained Upward Movement_1

Risk Warnings and Disclaimers

Comments

Add to Favorites

Ukadike Micheal

Economic

Palestinian-Israeli conflict

Amid escalating tensions in the Red Sea, China has urged all relevant parties to ensure the safety of navigation in the region, emphasizing its significance as a crucial international trade route. The United States is reportedly seeking China's assistance in pressuring Iran, a key supporter of the Yemen-based Houthi rebels. However, China's Ministry of Commerce has refrained from committing to diplomatic or military intervention in the crisis.

The Red Sea's strategic importance as a global trade route cannot be overstated, prompting China to closely monitor developments and pledge support to foreign trade enterprises. The recent series of strikes by the US and the UK against the Houthis, in response to their campaign following Israel's invasion of Gaza, has further complicated the situation.

China's extensive investments and close ties in the Middle East, coupled with its support for the Palestinian cause in the Gaza conflict, have positioned the nation in a delicate diplomatic balancing act. The Houthi attacks, fueled by Iran's backing, have presented a significant challenge to China's regional relations, given its substantial reliance on the Middle East for crude oil imports and trade with the EU, much of which flows through the Red Sea.

Notably, China brokered a reconciliation between Iran and Saudi Arabia last year, showcasing its diplomatic prowess in the region. However, the Houthi-induced disruptions have led to increased shipping costs and significant losses for Chinese companies, prompting concerns about the impact on China's economy. The Shanghai Containerized Freight index has surged to its highest level in months, reflecting the heightened costs of rerouting vessels around the Cape of Good Hope in Africa.

The repercussions extend beyond economic concerns, as disruptions in the Red Sea shipping route have prompted China's largest shipping company, Cosco, to redirect cargo away from the region, leading to heightened expenses and delays for exporters. These developments have added an unwelcome headwind to an economy already grappling with internal challenges.

Furthermore, the disruptions pose risks to global supply chains, particularly for European high-tech suppliers to Asia, which were gradually recovering from the aftermath of the pandemic and Russia's invasion of Ukraine. Analysts caution that while China is unlikely to intervene directly through military operations or pressure on Iran, it will likely emphasize the importance of international maritime channels through general statements.

The presence of China's People's Liberation Army naval base in Djibouti, at the mouth of the Red Sea, adds a layer of complexity to the situation. While the base signifies China's strategic interests in the region, analysts believe that direct military involvement or alignment with US policy may contradict Beijing's diplomatic stance and principle of avoiding military conflict whenever possible.

The evolving situation in the Red Sea presents a multifaceted challenge for China, impacting not only its economic interests but also its diplomatic relations and strategic positioning in the region. As global stakeholders navigate this complex landscape, the implications for international trade and maritime security remain a focal point of concern, underscoring the delicate balance China must strike in safeguarding its interests while navigating a volatile geopolitical environment.