Tuesday, June 6, 2023

Binance… that’s it, just Binance… actually, kidding, also signs of inflation easing, although there are possible issues ahead with grain

“Human life is driven forward by its dim apprehension of notions too general for its existing language.” – Alfred North Whitehead ||

Hi all! (Did I really wish you all a happy Friday yesterday? I meant to say happy Monday – what I get for trying to get a head start on the newsletter the day before with a weekend brain and then not proofreading carefully. Quite the start to the week, right?) Anyway, today I can wish you a happy 6/6 😊. I do love symmetry.

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WHAT I’M WATCHING

Binance. The SEC has sued Binance (the largest cryptocurrency exchange in the world by trading volume). The charges are damning, the exchange is in trouble and crypto asset prices dropped sharply yesterday, but the net impact is likely to be relatively muted at this stage. More on this below.

Global reaction to the Binance news. Since the close of US markets yesterday, the BTC price has been holding steady and even recovering slightly, which suggests that investors outside the US feel the potential impact has been priced in.

Inflation easing. More signs of easing inflation are trickling in. On top of the nice surprises from Europe last week, yesterday we saw EU producer prices for April come in much lower than expected, 1.0% year-on-year vs 5.9% forecast and 5.5% in March. On a month-on-month basis, they fell for the fourth month in a row, and by the most on record (going back to 1981). And this morning’s publication of the latest ECB monthly survey showed that consumer expectations for euro-zone inflation have eased significantly, down to 2.5% from 2.9% – reassuringly close to the 2% target. This is very good news indeed, and potentially bodes well for next week’s US CPI print.

(chart via Investing.com)

Grain prices. Yesterday’s collapse of a dam in Ukraine, and reports of the worst US corn crop in three years, could push grain prices higher. What’s more, a destructive weather cycle known as El Niño is expected to kick off this year. This is not only bad for inflation, it tends to make it hard to feed people and livestock, which could go a long way toward further stirring social unrest which in turn triggers all sorts of human and economic costs. The Dow Jones grain index is down 11% year-to-date, but up more than 5% since the beginning of the month – not at painful levels yet, but worth watching.

(chart via TradingView)

MARKETS

A very big broom

You know that thing where you publicly say markets are boring and then wham, some drama drops? It’s happened to me many times, and yesterday just adds to the list.