There doesn't seem to be any reason for decoupling currently, with Bitcoin expected to mirror the price action of major US equities, namely the Nasdaq and S&P 500
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FXMAG.COM team asked M4Markets to share their thoughts on the Eurozone inflation and European Central Bank interest rate decision, Bitcoin, Microsoft and Tesla earnings.
M4Markets: From the last ECB meeting minutes, there is a stronger contingent looking for higher rates. Headline inflation came down from 10.10% to 9.20%, but that tends to be volatile, so the ECB doesn't pay as much attention to the headline figure as it does to the core. And core expanded from 5.0% to 5.2% year-on-year, so there would be even more reason to hike than the last meeting.
Given the high inflation, the main reason for the ECB not to raise rates as much would be lingering concerns about the impact on the Eurozone economy. As long as the economic indicators are positive and core inflation remains elevated, the ECB will likely be more inclined towards 50 bps or even 75 bps hikes. Note that European rates are still 2.0%, or 200 bps, behind the Fed's.
Bitcoin had given back some of its spectacular gains, but its price its still elevated. What do you expect from the leading crypto in the near future?
Crypto has largely been responding to the actions of central banks, as would be expected of a relatively high-risk asset. There doesn't seem to be any reason for decoupling currently, with Bitcoin expected to mirror the price action of major US equities, namely the Nasdaq and S&P 500.
The recent 40% surge in BTC has recovered more than the loss suffered in the aftermath of the FTX scandal and could continue to follow the general risk-on-risk-off trend as the event is now fully dismissed. With the Fed expected to slow hiking and pause in the near future, BTC could get some more backing as the dollar weakens through the winter. Corrections must be expected, though, as we near last summer's high of $25200.
Some big names report earnings soon. What do you expect from Microsoft and Tesla?
Microsoft has been quite active lately, announcing a deal to invest in ChatGPT and reducing its workforce to cut costs. So there will likely be much attention on additional financial details about how these moves will affect the company. The issue is if there will be an impact on guidance since Microsoft typically provides it for the coming quarter.
Tesla is still all about deliveries, so the main thing would be to see if there has been any change in sales numbers due to the recently announced price cut. And then to see how much that might revise guidance. There has been much anticipation for a potential announcement of another Gigafactory, potentially in Mexico, and if that isn't announced, it could lead to further disappointment.
