Friday, March 15, 2024

BTC is still (also) a macro asset, politics and crypto

“Coming back to where you started is not the same as never leaving.” – Terry Pratchett ||

Hi all! No audio today again – I’ll pick that back up once Europe shifts clocks, want to prioritize getting this out by 8amET.

So, about next week: I’ll be in London Monday-Wednesday at the Digital Asset Summit, if you’re also there I’d love to say hi! And then I’m heading up to Edinburgh to visit my daughter. This means I won’t be able to publish regularly next week, but I do aim to get at least a couple out.

And the week after is going to be choppy, too, what with Easter (yay!) and more hospital stuff (not yay). I’m already looking forward to getting back to a normal schedule, have some new features planned for April. 😊

IN THIS NEWSLETTER:

• Politics and crypto

• BTC reminds us it is still (also) a macro asset

If you’re not a subscriber to the premium daily, I hope you’ll consider becoming one! You’ll get ~daily insight into the growing overlap between the crypto and macro landscapes, as well as some useful links, and (usually!) access to an audio read of the content. And there’s a free trial!

WHAT I’M WATCHING:

BTC reminds us it is still a macro asset

Rate cuts? What rate cuts?

Yesterday delivered even more evidence that inflationary pressures have not disappeared, further consolidating the Fed’s cautious stance.

The US producer price index (PPI) represents prices paid to US producers and is often regarded as a leading indicator of consumer price index (CPI) moves as it more closely reflects input costs passed on to the final customer. And it’s sending worrying signals.

Yesterday, we got the US PPI data for February, which came in much higher than expected with a 1.6% year-on-year growth in February (vs 1.1% expected, 1.0% in January) and a 0.6% jump month-on-month (vs 0.3% expected and previous), the highest increase in six months.

Core PPI also beat forecasts although by less, highlighting the role of energy costs in the headline figure. Core PPI in the US for February increased by 0.3% month-on-month, higher than the 0.2% expected but less than January’s 0.5%. The year-on-year figure held steady at 2.0%.

(chart via Bloomberg)

What’s more, US retail sales for February came in yesterday at 0.6% month-on-month, slightly less than the expected 0.8% but still the highest growth since last September.

Yesterday’s confirmation had a stronger impact on rates expectations than did the upside surprise to the CPI data out on Tuesday, with the consensus number of cuts by the end of the year dropping to three, finally matching the Fed’s official forecast. Next week, after their rates-setting meeting, the FOMC will publish an update to their economic projections which could show higher expected fed funds and inflation for 2024.