Trump’s tariff plans could be harming his ‘animal spirit’ investors

Economic

Summary:

When Donald Trump pulled off a surprise win in the 2016 presidential election, the news ignited a powerful rally in the U.S. stock market that lasted into early February 2018.

During that 15-month span, both the S&P 500 index and the Nasdaq Composite index posted gains of 30 percent or more. News stories at the time proclaimed that Trump’s pro-growth strategies that embraced tax cuts and deregulation had unleashed “animal spirits” among investors.

Immediately following Trump’s win in the 2024 election, the same phenomenon appeared to be taking place, as the U.S. stock market posted strong gains in November and into December. The rally has stalled so far this year, however, leaving investors less confident of what lies ahead.

The stock market rally’s pause has been linked to a surge in U.S. Treasury bond yields of a full percentage point since the Federal Reserve began easing monetary policy at the September Federal Open Market Committee meeting. Some observers believe the yield on the 10-year Treasury could reach the 5 percent threshold, which would be the highest level since 2007.

In the process, the Treasury yield curve has become positively sloped for the first time since 2022. The so-called “term premium,” which measures the compensation investors require for bearing the risk that interest rates may change over the life of a bond, is also positive now. It reflects investor uncertainty about the outlook for inflation amid large federal budget deficits and prospects for hikes in tariffs.

A Wall Street Journal article observes that “bear steepenings” following inverted yield curves are rare, and they are mostly reminiscent of the stagflation environment of the 1970s and early 1980s.

DC Bureau: Rubio unanimously confirmed as secretary of State, becoming Trump's first Cabinet official

So, what is behind the recent developments in the stock and bond markets?

The most common explanation is that investors have been lowering their expectations for Fed rate cuts in response to better-than-expected economic news. In late September, the Treasury market was pricing in cuts in the funds rate of a full percentage point or more in 2025. Now investors are expecting only one or two quarter-point cuts in the wake of the strong jobs report for December, and some are wondering if there will be any cuts.

Beyond this, a shift may be taking place in the way investors view the economic landscape today versus the environment during Trump’s first term.

At that time, the U.S. economy was in the throes of a sub-par recovery from the 2008 Financial Crisis, inflation was dormant and 10-year Treasury bond yields fluctuated in a narrow range centered about 2 percent. Amid this, Trump’s top priority became the Tax Cut and Jobs Act that was enacted at the end of the year, which fueled the post-election rally in stocks.

By comparison, Trump is inheriting a much stronger economy now. It is estimated to have grown at a 2.8 percent rate last year while the unemployment rate ended the year at 4.1 percent. With the economy operating near its long-term potential, investors are concerned that the federal budget deficit in excess of 6 percent of GDP is too large.

The goal of Trump’s designated Treasury secretary, Scott Bessent, is to cut the deficit in half. However, this will be challenging considering that Trump wants to extend the Tax Cuts and Jobs Act for another 10 years and mandatory programs account for about 70 percent of total federal spending. Accordingly, bondholders are now seeking more compensation for the risk they are taking.

The biggest cloud hanging over the stock market, however, is what Trump will do on the tariff front to narrow the U.S. trade deficit. During his first term, he waited until 2018 before he tackled the trade issue when he boosted tariffs on select imports from U.S. trading partners and then undertook more significant action against China. Amid this, the stock market turned volatile and at one point sold off by about 15 percent before a U.S.-China truce was reached in mid-2019.

Since then, the U.S. current account deficit has doubled from 2 percent of GDP to 4 percent of GDP. Moreover, it is expected to widen further as the U.S. economy outpaces Europe and Japan, while China has been pumping out exports at a rapid clip. The U.S. dollar has also been unusually strong in the past two years and is approaching its all-time high in the mid-1980s, which will make it more difficult for U.S. companies to compete internationally.

In response, Trump appears determined to move quickly to put pressure on trading partners to narrow their trade surpluses with the U.S. But there is considerable uncertainty about how he will proceed.

The Washington Post reports that Donald Trump’s aides are exploring tariff plans that would be applied to every country — so-called “universal tariffs” — but that would only cover critical imports. If implemented, they would pare back the most sweeping elements of Trump’s campaign plans but would still carry major consequences for the U.S. economy and consumers. They would also be in addition to actions Trump has announced he is prepared to take against China, Mexico and Canada.

Meanwhile, Bloomberg reports that Trump’s advisors are studying a phased approach to unveiling tariffs in which there could be monthly increases of 25 to 5 percent, rather than a larger one-time increase in tariff rates. The goal would be to do so as a way to pressure countries to take strong action while containing some of the economic fallout.

Amid this, the big unknown is how far Trump is prepared to go to win a trade war before it winds up crushing animal spirits.

Nicholas Sargen, Ph.D., is an economic consultant for Fort Washington Investment Advisors and is affiliated with the University of Virginia’s Darden School of Business. He has authored three books including “Investing in the Trump Era: How Economic Policies Impact Financial Markets.”

Source:the hill

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.

Add to Favorites

Glendon

Economic

In the business world, one of the most significant decisions a company can make is whether to remain private or go public. This decision can affect everything from ownership structure and access to capital to regulatory requirements and market visibility. Understanding the differences between private and public companies is crucial for investors, entrepreneurs, and anyone interested in the business landscape.

In this article, we’ll explore the key distinctions between private and public companies, including ownership structure, funding sources, regulatory obligations, and the advantages and disadvantages of each.

What Is a Private Company?

A private company is a business entity whose shares are not available for purchase by the general public. Ownership of a private company is typically held by a small group of investors, such as the company’s founders, private equity firms, venture capitalists, or a limited number of institutional investors. Private companies are not listed on public stock exchanges, and their shares are not freely traded on the open market.

Key Features of Private Companies:

Ownership: Private companies are usually owned by a small group of shareholders, often including the company's founders, family members, and venture capitalists.

Shares: Shares are not publicly traded, and the ownership is not liquid. This means it’s harder to buy or sell shares compared to public companies.

Funding: Private companies typically raise capital through private investments, such as venture capital, private equity, or personal savings. They may also take loans from banks or financial institutions.

Regulatory Requirements: Private companies face fewer regulatory requirements than public companies. They are not required to disclose financial information or undergo the same level of scrutiny from regulatory bodies like the

U.S. Securities and Exchange Commission (SEC).

Size and Scope: Many private companies are small to medium-sized businesses, although some can be quite large (e.g., Cargill, Mars). The lack of public scrutiny often allows these companies to focus on long-term growth without pressure from shareholders demanding short-term returns.

Advantages of Private Companies:

Greater Control: Since ownership is limited, founders and investors have more control over company decisions without external interference from public shareholders.

Less Regulatory Scrutiny: Private companies are not subject to the same extensive reporting requirements as public companies, which can save time and money on compliance.

Flexibility: Private companies have more flexibility in terms of business strategy and long-term planning without the pressure of meeting quarterly financial expectations.

Disadvantages of Private Companies:

Limited Access to Capital: Private companies often find it harder to raise large amounts of capital compared to public companies, as they rely on private investors or loans.

Illiquid Ownership: The ownership in private companies is not easily transferable, meaning it can be difficult to sell shares or find buyers.

Limited Visibility: Private companies do not benefit from the public recognition or brand awareness that comes with being listed on a stock exchange.

What Is a Public Company?

A public company (also known as a publicly traded company or a listed company) is one that has sold shares of stock to the public through an initial public offering (IPO). Once a company goes public, its shares are traded on public stock exchanges, such as the New York Stock Exchange (NYSE) or the NASDAQ. Public companies are subject to extensive regulatory oversight and are required to disclose financial information regularly.

Key Features of Public Companies:

Ownership: Ownership is distributed among a large number of public shareholders who buy and sell shares on the stock exchange. These shareholders can include individuals, institutional investors, and mutual funds.

Shares: Shares of public companies are publicly traded, making it easy for shareholders to buy and sell ownership stakes.

Funding: Public companies have the ability to raise capital by issuing shares to the public, which can provide a significant source of funding for expansion, research and development, and other business activities.

Regulatory Requirements: Public companies are subject to strict regulatory oversight. In the U.S., the SEC requires public companies to file regular reports, such as quarterly 10-Q reports, annual 10-K reports, and other disclosures related to financial performance, executive compensation, and potential risks.

Size and Scope: Public companies are typically larger and more established than private companies. They can span a wide range of industries, from technology and finance to healthcare and energy.

Advantages of Public Companies:

Access to Capital: Public companies can raise large amounts of capital by selling shares to the public through an IPO or subsequent offerings. This can fuel expansion, acquisitions, and research and development.

Liquidity: Shares of public companies are easily tradable on stock exchanges, which provides liquidity for investors and shareholders.

Visibility and Prestige: Being publicly listed can enhance a company’s visibility, credibility, and brand recognition, which can help attract customers, talent, and investors.

Stock-Based Compensation: Public companies can offer stock options or stock-based compensation to employees, which can help attract and retain talent.

Disadvantages of Public Companies:

Regulatory Scrutiny: Public companies are required to adhere to rigorous reporting standards and are closely scrutinized by regulators, investors, and analysts. This can be time-consuming and costly.

Short-Term Pressure: Public companies often face pressure from investors and analysts to meet quarterly earnings expectations, which can result in a focus on short-term profitability rather than long-term strategy.

Loss of Control: When a company goes public, the founders and original owners often lose some degree of control, as decision-making is now shared with public shareholders and external investors.

Costs of Compliance: Complying with regulatory requirements can be expensive. Public companies must invest in auditing, legal, and financial reporting services to meet SEC and exchange requirements.

Key Differences Between Private and Public Companies

Private vs. Public Company
Feature	Private Company	Public Company
Ownership	Small group of investors, often founders & VCs	Large number of public shareholders
Shares	Not publicly traded	Publicly traded on stock exchanges
Funding	Private investments, loans	Public offering of shares (IPOs, secondary offerings)
Regulatory Requirements	Fewer regulations, no mandatory public disclosures	Subject to SEC regulations, mandatory reporting
Size and Scope	Typically smaller, though can be large (e.g., Cargill, Mars)	Often large, publicly listed on major exchanges
Liquidity	Illiquid ownership, hard to sell shares	Liquid ownership, shares easily bought and sold

Conclusion

Both private and public companies have distinct advantages and disadvantages. Private companies offer greater control, less regulatory scrutiny, and flexibility but may struggle with capital-raising and liquidity. Public companies, on the other hand, have access to substantial capital, liquidity, and enhanced visibility but face increased regulatory burdens and potential pressure from shareholders.

The decision to remain private or go public is influenced by factors such as the company’s growth stage, capital needs, ownership structure, and long-term business goals. Understanding the fundamental differences between these two types of companies can help entrepreneurs, investors, and stakeholders make more informed decisions based on their unique circumstances and objectives.

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

Risk Warnings and Disclaimers

Add to Favorites

Glendon

Economic

Canada, the second-largest country in the world by land area, is one of the most economically stable and prosperous nations globally. With a diverse and highly developed economy, Canada boasts a combination of abundant natural resources, a well-educated workforce, and a strong trade network. Its economic strength is backed by significant global trade relationships, innovation, and a sound financial system.

In this article, we’ll delve into the various components of Canada’s economy, including its economic sectors, major exports, trade partners, and some of the key challenges it faces in the modern global economy.

Key Sectors of the Canadian Economy

Canada’s economy is highly diversified, with key sectors that include natural resources, manufacturing, services, and technology. Here’s a breakdown of the major sectors:

Natural Resources and Energy: Canada is rich in natural resources, making the extraction of raw materials a crucial part of its economy. This includes vast deposits of oil, natural gas, minerals, and timber. The oil sands in Alberta are among the largest oil reserves globally, and Canada is a significant exporter of oil, particularly to the United States. Other important resources include gold, nickel, and uranium.

The energy sector, including renewable energy sources, is growing in importance. Canada is one of the largest hydroelectricity producers in the world, and the transition to cleaner energy sources is a priority for the Canadian government.

Manufacturing: Manufacturing is a cornerstone of Canada’s industrial landscape. The country produces automobiles, machinery, aerospace products, and chemicals, with Ontario and Quebec being the key hubs for automotive and aerospace manufacturing. The automotive industry in Canada is highly integrated with the U.S. market, with major car manufacturers like General Motors, Ford, and Chrysler having large operations in Canada.

Services: The service sector has grown to become the largest segment of the Canadian economy, accounting for over 70% of the country’s GDP. The financial services industry, including banks and insurance, is particularly important in Canada, with major cities like Toronto and Vancouver being financial hubs.

Technology and telecommunications services are also expanding rapidly, with cities like Toronto, Montreal, and Vancouver serving as key centers for innovation and tech startups. Canada's highly educated workforce and competitive corporate tax rates have attracted many multinational companies to set up operations in these cities.

Agriculture: Canada is a major producer and exporter of agricultural products, including wheat, canola, corn, and soybeans. The agriculture sector also includes dairy, poultry, and livestock. Much of Canada’s farming activity is concentrated in the Prairie provinces of Alberta, Saskatchewan, and Manitoba, while the Ontario and Quebec regions are key producers of fruits, vegetables, and dairy products.

Trade and Global Relationships

Canada has a highly open economy, and its trade relationships play a crucial role in shaping its economic performance. With the United States as its largest trading partner, Canada has benefited from the integration of markets through agreements like the United States-Mexico-Canada Agreement (USMCA), formerly known as NAFTA.

The U.S. remains Canada’s most important trading partner, accounting for nearly 75% of Canadian exports. However, Canada has increasingly diversified its trade relationships. The Comprehensive Economic and Trade Agreement (CETA) with the European Union, and trade agreements with countries in the Asia-Pacific region like Japan and South Korea, have expanded Canada’s access to new markets. The Trans-Pacific Partnership (TPP), which Canada is a part of, also aims to enhance trade relations with countries across the Pacific Rim.

Economic Growth and Employment

Canada’s economy has been resilient, with steady growth over the past few decades, although like most developed economies, it faces certain challenges. The country’s GDP growth rate has typically been stable, but the COVID-19 pandemic led to a temporary recession. The government’s response, including fiscal stimulus and social support programs, helped the country recover, and Canada is now on a path to growth again.

The unemployment rate in Canada is relatively low compared to global averages, though it fluctuates due to factors such as demographic changes, technological disruption, and external economic conditions. The country’s labor force is highly educated, with a strong emphasis on high-tech industries, healthcare, and services.

Challenges Facing the Canadian Economy

Despite its strengths, the Canadian economy faces several challenges that need to be addressed for sustainable growth:

Housing Affordability: Housing prices in major cities like Toronto and Vancouver have risen significantly in recent years, making homeownership increasingly difficult for young Canadians. High levels of household debt also raise concerns about long-term financial stability.

Environmental Sustainability: As a major producer of fossil fuels, Canada faces ongoing challenges related to climate change and environmental sustainability. Transitioning to renewable energy sources, reducing emissions, and maintaining economic growth while protecting the environment will be key areas of focus for the Canadian government.

Global Trade Tensions: Trade wars and tariffs, particularly those between the U.S. and China, can have a significant impact on Canada’s export-driven economy. Though Canada has diversified its trade relationships, it remains highly dependent on access to the U.S. market, and any changes in this relationship could impact economic growth.

Indigenous Rights and Economic Inclusion: Canada’s economy has historically been dominated by non-Indigenous populations, but efforts are underway to improve economic inclusion for Indigenous communities. Achieving greater economic empowerment for Indigenous groups is seen as a crucial step for building a more equitable economy.

Future Outlook

Canada’s economy remains strong, with opportunities for continued growth driven by its natural resources, technological advancements, and trade relationships. The country’s focus on innovation, sustainability, and inclusion will likely shape its future economic landscape.

The Canadian government’s commitment to reducing carbon emissions, promoting clean energy, and investing in tech industries is expected to create new economic opportunities. With a diversified economy, a highly educated workforce, and a commitment to global trade, Canada is well-positioned to continue its path as a leading global economy.

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

Risk Warnings and Disclaimers

Add to Favorites

IMF

Economic

We project global growth will remain steady at 3.3 percent this year and next, broadly aligned with potential growth that has substantially weakened since before the pandemic. Inflation is declining, to 4.2 percent this year and 3.5 percent next year, in a return to central bank targets that will allow further normalization of monetary policy. This will help draw to a close the global disruptions of recent years, including the pandemic and Russia’s invasion of Ukraine, which precipitated the largest inflation surge in four decades.

As One Cycle Ends, Another Begins Amid Growing Divergence_1

Though the global growth outlook is broadly unchanged from October, divergences across countries are widening. Among advanced economies, the United States is stronger than previously projected on continued strength in domestic demand. We have raised our growth projection for the US this year by 0.5 percentage point, to 2.7 percent.

Growth in the euro area, by contrast, is likely to increase only modestly, to 1 percent from 0.8 percent in 2024. Headwinds include weak momentum, especially in manufacturing, low consumer confidence, and the persistence of a negative energy price shock. European gas prices remain about five times as high as in the United States, versus twice as high before the pandemic.

As One Cycle Ends, Another Begins Amid Growing Divergence_2

In emerging market economies, growth projections are broadly unchanged, at 4.2 percent and 4.3 percent this year and next. Elevated trade and policy uncertainty is contributing to anemic demand in many countries, but economic activity is likely to pick up as this uncertainty recedes. This includes China, where we now project 4.5 percent growth next year, up 0.4 percentage point from our prior forecast.

Some divergence between large economies has been cyclical, with the US economy operating above its potential while Europe and China are below. Under current policies, this cyclical divergence will dissipate. But the divergence between the US and Europe is more due to structural factors, and the disconnect will linger if these are left unaddressed. It reflects persistently stronger US productivity growth, particularly but not exclusively in the technology sector, linked to a more favorable business environment and deeper capital markets. Over time, this translates into higher returns on US investment, increased inbound capital flows, a stronger dollar and US living standards pulling away from those of other advanced economies. For China, it is notable that potential growth is now more like that of other emerging market economies.

Economic policy uncertainty is elevated, with many governments newly elected in 2024. Our projections incorporate recent market developments and the impact of heightened trade policy uncertainty, assumed to be temporary, but refrain from making assumptions about potential policy changes that are currently under public debate.

As One Cycle Ends, Another Begins Amid Growing Divergence_3

In the near term, a constellation of risks could further exacerbate these divergences. European economies could slow more than anticipated, especially if investors grow more concerned about public debt sustainability in more vulnerable countries. The main risk is that euro area monetary and fiscal policy could simultaneously run out of room if weaker economic activity pushes interest rates back toward the effective lower bound just as insufficient fiscal consolidation raises risk premia, in turn further constraining fiscal policy. In China, should fiscal and monetary measures prove insufficient to address domestic weakness, the economy is at risk of a debt-deflation stagnation trap, where falling prices raise the real value of debt, undermining activity further. The sharp decline in Chinese government bond yields, seen as haven for local investors, shows rising investor concern. Both in China and Europe, these factors could lower inflation and economic growth.

By contrast, while many of the policy shifts under the incoming US administration are hard to quantify precisely, they are likely to push inflation higher in the near term relative to our baseline. Some indicated policies, such as looser fiscal policy or deregulation efforts, would stimulate aggregate demand and increase inflation in the near term, as spending and investment increase immediately. Other policies, such as higher tariffs or immigration curbs, will play out like negative supply shocks, reducing output and adding to price pressures.

A combination of surging demand and shrinking supply would likely reignite US price pressures, though the effect on economic output in the near term would be ambiguous. Higher inflation would prevent the Federal Reserve from cutting interest rates and could even require rate hikes that would in turn strengthen the dollar and widen US external deficits. The combination of tighter US monetary policy and a stronger dollar would tighten financial conditions, especially for emerging markets and developing economies. Investors already anticipate such an outcome, with the US dollar gaining around 4 percent since the November election.

Overall, these near-term risks could lead to further divergence across economies. In the medium term, about five years, the positive effects of the US fiscal shock may dissipate and could even reverse if fiscal vulnerabilities increase. Deregulation efforts can boost potential growth in the medium term if they remove red tape and stimulate innovation. However, there is a risk that excessive deregulation could also weaken financial safeguards and increase financial vulnerabilities, putting the US economy on a dangerous boom-bust path. Medium-term risks to economic output would be heightened by restrictive trade policies and stricter migration limits.

Renewed inflation pressures, should they arise so soon after the recent surge, could well de-anchor inflation expectations this time around, as people and businesses are now much more vigilant about protecting their real income and profitability. Inflation expectations are further away from central bank targets than in 2017–21, which suggests increased risks of higher inflation. In this environment, monetary policy may need to be more agile and proactive to prevent expectations from de-anchoring, while macro-financial policies will need to remain vigilant to avoid a buildup of financial risks.

As One Cycle Ends, Another Begins Amid Growing Divergence_4

The issue is likely to be exacerbated for emerging market economies, given the passthrough of dollar exchange rates to domestic prices and the effects of weaker domestic growth in China. In most cases, the appropriate policy response in emerging market economies will be to let currencies depreciate as needed while adjusting monetary policy to achieve price stability. However, in cases where inflation dynamics have become clearly unanchored or where there are financial stability risks, capital flow management and foreign exchange interventions could help, as long as these are not a substitute for necessary macroeconomic adjustments, in line with the IMF’s Integrated Policy Framework.

For several countries, fiscal policy efforts have been delayed or insufficient to stabilize debt dynamics. It is now urgent to restore fiscal sustainability before it is too late and to build sufficient buffers to address future shocks that could be sizable and recurrent. Additional delays could trigger a worrying spiral where borrowing costs keep rising as markets lose confidence, further increasing adjustment needs. Recent strains in Brazil’s financial markets, like the reaction to the UK’s September 2022 mini-budget, underscore how funding conditions can deteriorate suddenly.

While any sizable fiscal consolidation is bound to weigh on economic activity, countries should take special care to preserve growth as much as possible along the consolidation path, for instance by focusing the adjustment on reducing untargeted transfers or subsidies rather than government investment spending. To achieve this—and help overcome persistent structural differences driving growth divergences—there should be renewed focus on ambitious structural reforms to directly boost growth. These include targeted reforms to better allocate resources, increase government revenues, attract more capital, and foster innovation and competition.

Finally, additional efforts should be made to strengthen and improve our multilateral institutions to help unlock a richer, more resilient, and sustainable global economy. Unilateral policies that distort competition—such as tariffs, nontariff barriers, or subsidies—rarely improve domestic prospects durably. They are unlikely to ameliorate external imbalances and may instead hurt trading partners, spur retaliation, and leave every country worse off.

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

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Cryptocurrency

Bitcoin tested $100,000 support on Jan. 21 as the dust settled on US President Donald Trump’s inauguration. Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_1

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_1

BTC/USD 1-hour chart. Source: Cointelegraph/TradingView

BTC price targets focus on sub-$100,000

Data from Cointelegraph Markets Pro and TradingView showed sellers keeping up the pressure on the six-figure Bitcoin price boundary.

Inauguration Day offered plenty of volatility but ultimately disappointed Bitcoin bulls as Trump made no mention of Bitcoin, crypto or a US strategic reserve involving them.

Longs thus suffered on the day, with 24-hour crypto-long liquidations circling $500 million at the time of writing, per data from monitoring resource CoinGlass. Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_2

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_2

Total crypto liquidations (screenshot). Source: CoinGlass

“$BTC is targeting the nearest liquidity on both sides,” trading platform Hyblock Capital wrote in part of its latest update on X. Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_3

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_3

BTC liquidations data. Source: Hyblock Capital

Traders entertained the idea of another sweep of liquidity in the mid to high $90,000 range next.

“I’d take a long from 99.5K~ if offered. I think gray box needs to hold for local bullishness and sweeping all the Trump leadup / news PA makes sense,” trader Crypto Chase told X followers alongside the 4-hour chart.

“I'd also accept a sweep of the 97K low, but that's farthest it should go. Any good amount of time spent past 96-97K and my plan / read is likely off. Inval low 90's, aiming for new ATH's.” Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_4

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_4

BTC/USD 4-hour chart. Source: Crypto Chase/X

Fellow trader XO argued that the December BTC price range was still in control, with lows around $90,000 and highs at $108,000.

“Decembers High & Decembers Low defines the key range for me. Acceptance out of either side most likely resolves in a trend,” they said.

“For now, the market will keep both bulls and bears speculating, but in truth, it’s just another range and that’s where my focus remains.”

Bitcoin “Choppiness Index” points to breakout

Trader and analyst Matthew Hyland emphasized the near-term importance of Bitcoin’s 10-day simple moving average (SMA), currently at $99,969.

“BTC quite the daily candle here. Tapped the 10 SMA then went to new all time highs and then back below resistance but still above the 10 SMA,” he told X followers.

“On this 10 SMA trajectory it will have to decide by Friday to either break back upward or lose the 10 SMA.” Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_5

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_5

BTC/USD 1-day chart with 10SMA. Source: Matthew Hyland

In a fresh update, James Check, creator of onchain data resource Checkonchain, predicted a new BTC price trend emerging sooner rather than later.

This was thanks to the Choppiness Index, a volatility tool now signaling the end of a period of sideways movement.

“The Bitcoin Choppiness Index is fully gassed, and ready to trend,” Check announced on the day.

“As covered back in late-Nov, the thesis was we likely had several weeks of chopsolidation before properly trending away from the $100k level. We're there.” Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_6

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_6

Bitcoin Choppiness Index. Source: James Check

Source: Cointelegraph

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Economic

The labour market is loosening with the ONS reporting another drop in the number of vacancies in the economy and a rise in unemployment in the three months to November to 4.4% from 4.3%.

The rise was partly driven by a fall of 47,000 in payrolled employment.

Vacancies were down to 812K in December from 813K in November, marking thirty consecutive months of decline and pointing to an underlying trend of loosening labour market conditions.

Yet, the Bank of England won't be minded to sound the all-clear on inflation just yet as average earnings rose by 5.6% year-on-year in November from 5.2% in October and regular pay (which excludes bonuses) rose by 5.6%, a rate that is well ahead of inflation. Falling Employment Sees Bank of England Sharpen the Knives_1

Falling Employment Sees Bank of England Sharpen the Knives_1

The Bank of England considers wages a key driver of inflation: as pay increases, spending power in the economy and demand increases. In turn, as businesses pay out more, they cover costs by raising prices.

"Earnings growth remains at a clip that is, clearly, incompatible with a sustainable return to the Bank of England's 2% inflation target over the medium-term," says Michael Brown, Senior Research Strategist at Pepperstone.

However, Brown also notes a statistical base effect is behind the jump, as this year's data is flattered by an unusually low print at the same time last year.

"The wage strength is surprising at first glance, but there is simply no longer the kind of momentum in the economy required to keep it going," says Matt Lewis at TopMoneyCompare.com.

Another measure of pay growth, the more timely PAYE income tax measurement, shows a 0.8% m/m fall in December, pushing down the 3-month y/y rate from 6.4% in November to 5.6% in December.

"That may mean this latest burst of wage growth is already fading," says Ashley Webb, UK Economist at Capital Economics. Falling Employment Sees Bank of England Sharpen the Knives_2

Falling Employment Sees Bank of England Sharpen the Knives_2

Financial markets see the next interest rate cut at the Bank of England falling in February, with one or two more seen over the remainder of the year.

Most economists we follow think the market is underpriced and that the Bank will cut on at least four occasions if not more.

Key to this move would be a deterioration in the labour market, which would weigh on wages and ultimately cool inflation.

For the Pound, this implies a high likelihood of a dovish tilt in market pricing.

"Overall, some Monetary Policy Committee members may be worried by the resurgence in regular private sector pay growth. But we suspect most of them will look at the signs that the loosening in the labour market will mean that wage growth will soon resume a downward trend," says Webb.

Falling Employment Sees Bank of England Sharpen the Knives_3

Image courtesy of Lloyds Bank.

Source: Poundsterlinglive

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

Risk Warnings and Disclaimers

Add to Favorites

Cohen

Economic

Dollar will continue to be strong despite huge current account deficit

The real trade-weighted dollar is extremely strong and getting stronger, though still shy of Plaza Accord-era heights (Figure 1). Given dollar strength and strong relative demand, the US is heading in 2025 towards a huge current account deficit, perhaps pushing 4% of gross domestic product.

Figure 1. Real-trade weighted dollar extremely strong

FX Markets 2025: US Bull in the China Shop_1

Financing lofty dollar ‘overvaluation’ and a massive current account deficit might herald a major dollar reversal. But that is not in the cards as strong demand for dollar assets will underpin the buck. Don’t bet on a Mar-a-Lago Accord or dollar ‘devaluation’.

The Federal Reserve faces sticky services prices and a relatively robust economy, complicating efforts to cross the last mile in getting inflation back on target. With the Fed having already scaled back expected 2025 rate cuts from 100 to 50 basis points and financial conditions being arguably accommodative, some ask if any cuts can be expected.

Longer-term rates are rising. That is also due to expectations President Donald Trump will largely succeed in extending the 2017 tax cuts and promulgating others, swelling an irresponsible 7% of GDP budget deficit and associated financing pressures.

Additionally, tariff threats, even if partly implemented, will render exports to the US less competitive, dealing a blow to foreign currencies. Higher tariffs and deportations will prop up inflation. Trump’s bluster will heighten global uncertainties and the dollar tends to appreciate in a risk-off environment.

In short, all signs point to continued extreme dollar strength. But in currency markets, it takes two to tango.

Prospects for euro strengthening are dim. Good progress is being made in getting inflation back to target, while the euro area economy languishes. Markets expect that the European Central Bank will cut its deposit rate by at least 100bps if not more over the next year, in contrast with the Fed’s more restrained posture. France and Germany are in a weakened political state. Europe is unlikely to mount an effective response to Trump. Given a tepid global economy and cranked up Chinese export machine, a weak euro won’t translate much into increased exports. Parity between the dollar and euro is in sight.

The yen should firm modestly over the year but it won’t be smooth sailing. Many analysts project the official rate will be hiked from 0.25% to 1%, influenced by real wage gains, firmer activity and inflation sustained above 2%. They may prove right. But the Bank of Japan at times seems very cautious about lifting – higher rates will lift the government’s interest bill and a stronger yen will push inflation down; fewer hikes put downward pressure on the yen via the carry trade. The BoJ is instinctively a free floater, but the Finance Ministry will unhappily jawbone if the yen is weak and if the yen rises. Sometimes the authorities appear schizophrenic.

The renminbi will be a tale of two currencies – the trade-weighted renminbi and the dollar-renminbi exchange rate.

The authorities have long and unconvincingly suggested analysts should focus on the trade-weighted renminbi. The real renminbi is extremely competitive, down sharply over the last three years (Figure 2). The International Monetary Fund and others suggest China’s current account surplus is roughly 1.5% of GDP and the trade surplus some 3%. Those estimates are in all probability vastly understated given opacity in China’s balance of payments data. China’s manufacturing trade surplus is roughly 10% of GDP.

Figure 2. Real renminbi is extremely competitive

The renminbi-dollar exchange rate is more relevant as a gauge for financial flows. Notwithstanding the enormous current account surplus, capital account pressures weigh heavily on the renminbi given major domestic economic headwinds and looming Trump tariffs. Authorities might be tempted to allow considerable renminbi depreciation in the face of any Trump tariffs. But given concerns about accelerated capital outflows and with the renminbi already hyper-competitive, they will most likely restrain depreciation through an array of opaque tools, without drawing lines in the sand.

A quarter of US trade is with Canada and Mexico. The Loonie is under pressure, having fallen some 7% since the summer following forceful Bank of Canada rate cuts amid a softening economy and weaker commodity prices. The central bank may not be finished. Trump’s trade threats are a wild card. Canadian politics is in turmoil.

The Mexican peso also has fallen since the summer. But with core inflation under 4% and Banco de México’s official rate at 10%, the authorities have substantial scope to react to market developments, while contending with Trump.

If Mexico and Canada can begin sorting out relations with Trump 2.0 over the year, their currencies may have scope to find renewed footing and firm. Otherwise, a rocky economic fallout could occur.

There is every reason the dollar will remain extremely strong for the first half of 2025. US slowing in the second half and greater clarity on Trump’s trade policies might pave the way for some modest easing.