This week’s US data is mixed, and the expectation for a rate cut remains virtually unchanged. The overall topic of the crypto market remains limited, focusing mainly on the ETF expectations for ETH and SOL. What are the significant economic events to watch for in the coming week?
1. US new home sales in May dropped 11.3% month-on-month, hitting a six-month low, indicating slow recovery in the housing market.
2. Data shows that the labor market is loosening.
3. Soft economic data and weakened momentum increase the possibility of a Fed rate cut in September.
4. PCE and Michigan Consumer Sentiment Index data were released, largely in line with market expectations.
5. Despite government intervention, the Japanese Yen continues to be washed out by the market.
6. The Euro is weakening, with a focus on the dynamics of the French election.
7. Views of officials on current inflation?
8. VanEck and 21Shares have successively submitted Solana ETF applications.
Next Week’s Events
Conclusion
TL;DR
International politics is fermenting, and the US dollar continues to strengthen. This is not only due to political and war factors but also the increasingly apparent economic strength of the US. Shorting the US dollar can be seen as a giveaway.
All institutions are shorting the Japanese Yen, which has become a gambling arena, driven by hedge funds, retail investors, speculators, and the Japanese government’s attempts to turn the tide.
The highly discussed US presidential election barely affects traditional financial markets, but Trump’s strong support for Crypto directly affects the trends of related meme sectors.
Fed officials’ statements are as boring as usual, with no substantial guidance.
The US data this week is mixed, and the expectation for a rate cut remains virtually unchanged, with continued preference for risky assets.
The market currently believes there is about a 65% chance of a rate cut in September and expects nearly two rate cuts before the end of the year.
It is unlikely that the ETF application for SOL will be approved in the short term, and it is more of an emotional agitation and a challenge to government authority.
On Wednesday, the US reported a sharp 11.3% month-on-month drop in new home sales in May, with a seasonally adjusted annual rate of 619,000 units, hitting a six-month low due to rising mortgage rates dragging down demand, further indicating a slow recovery in the housing market. However, April data was significantly revised upwards, resolving the impact of the low May sales, and new home supply has reached a new high in over 16 years. After the data release, US bond yields briefly rose but later fell.
Data released on Thursday showed a slight drop in initial jobless claims last week, but continued claims for unemployment benefits in mid-June jumped to the highest level in two and a half months, indicating that the labor market conditions are loosening under the circumstances of slowing economic growth.
Continued unemployment claims
Other data released on Thursday all highlighted weakened economic momentum, with core durable goods spending in May dropping by 0.1%, below market expectations of a 0.2% increase, and exports declining, leading to an expansion of the trade deficit in goods. The annual GDP growth rate for the first quarter dropped from 3.4% in the previous quarter to 1.4%, in line with expectations. A series of weakened data increased the possibility of a Fed rate cut in September.
FedWatch September rate cut probability distribution
Data released on Friday was slightly stronger than expected, with the PCE data showing a year-on-year increase of 2.6% and a month-on-month flat, but basically in line with market expectations, causing US bond yields to rebound to levels seen two weeks ago.
The University of Michigan’s June US consumer confidence index was revised up to 68.2, slightly higher than market expectations. In addition, inflation expectations for the next one and five years were both adjusted downward to 3%. Digitally, emotions are mixed, and although the University of Michigan’s survey has some discussion, the data itself is relatively unimportant to institutions, reflecting household expectations rather than market participants’ expectations.
The Japanese Yen continues to decline, and we can see clear government intervention on the chart, but it is obviously not being respected by the market. The Yen continues to depreciate, hovering around 160 levels. The Yen has become a gambling arena for everyone, with no fundamental support, and the market is unilaterally washing out the Bank of Japan and the Ministry of Finance. In addition, the Bank of Japan is conducting a survey on the scope and speed of reducing its bond purchase program among participants in the Japanese government bond market.
The survey is expected to serve as a basis for discussions between the Bank of Japan and bond market participants from July 9-10, and will ask market participants, including banks, securities firms, and life insurance companies, about their expectations for the scope and speed of the reduction.
USD/JPY trend over the week
EURUSD fell to a range of consolidation around 1.0700 ~ 1.0720. The market is pessimistic and is mainly focused on the French election held over the weekend. German Chancellor Scholz confirmed that the three main centrist groups in the European Parliament have reached a consensus on the EU’s top positions, nominating von der Leyen for re-election as President of the European Commission, which is expected to be approved.
7. Views of officials on current inflation?
Atlanta Fed President Bostic stated that recent data shows new progress, including the proportion of goods and services with a price increase of over 5% falling to below 20%, which is closer to pre-pandemic levels and similar to the proportion when inflation last slowed down rapidly.
Fed Governor Bowman reiterated that she is not yet prepared to support a rate cut in the face of persistently high inflation pressures. Bowman stated that overall economic activity has been strong this year but has slowed somewhat, and there has been no progress in terms of inflation.
IMF Managing Director Georgieva stated that inflation is expected to return to the Fed’s 2% target in 2025, earlier than the Fed’s own prediction of 2026, partly because the surge in US consumer spending after the pandemic may be waning. However, the IMF is concerned about the US’s high debt levels and has called for the US to adopt a more restrictive fiscal policy.
On 6/27, VanEck submitted an application for a Solana ETF, causing SOL prices to rise by about 10% on the news; 21Shares followed suit and also submitted an application on 6/28. Considering the current overly concentrated chip structure of SOL, which has been repeatedly identified by the SEC as a security, has not yet landed on the CME futures market, and the profitability after listing…etc., and the fact that there has been no significant change in the SEC’s composition, we believe that the approval rate of the Solana ETF in the medium to short term is 0%.
However, this does not have much impact on the emotional speculation, and fund driving is often dominated by emotions and consensus. The action of submitting an ETF application is more like a demonstration and provocation to the government. With the expected approval of an ETH spot ETF, the SOL incident may bring some speculative willingness to the current liquidity-starved Crypto market, and this will also give narrative traders some potential operating space.
The PMI indices of the US S&P and ISM will be released one after another from Monday to Wednesday, and HCOB’s PMI index will be released in Europe.
The FED meeting minutes on Wednesday night are more worthy of attention, and if any clues can be found in the officials’ opinions, the market may find topics to speculate on. However, we do not expect any good news, as the attitudes of most officials have been clearly conservative in recent months, so caution is needed when trading at that time.
Non-farm employment data will be released on Friday night. As previously analyzed, it is difficult to predict due to multiple factors and may be subject to price manipulation, making it a point of concern for traders.
The slaughter of the Japanese Yen and the incompetence of the Japanese and French governments is the biggest highlight in the traditional financial market this week, leading to a certain extent of encouragement for the US dollar. Speaking of the US dollar, we expect to discuss “Why the US dollar can remain stable in the face of collective attacks from the BRICS nations and minnows” with you next week.
It is undeniable that the overall topic of the crypto market remains limited, mainly focusing on the ETF expectations for ETH and SOL. According to The Block, the SEC has returned the S-1 form to the potential issuer of the ETH spot ETF with comments, requiring the comments to be dealt with and resubmitted by 7/8, and we will also update you on this in the next weekly report.
Stay tuned.
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