Wednesday, June 26, 2024

an economy check-in, South Korean crypto ETFs, AI vs Bitcoin power guzzlers

“The world is an illusion, but an illusion which we must take seriously.” – Aldous Huxley  ||

Hello everyone! A short newsletter today as I have to publish early to go and catch a plane. I’ll be at the HedgeWeek event tomorrow (if you’re there, I’d love to say hi!) and travelling back home on Friday, so the next edition will be on Saturday with the free weekly.

For sure this means there’ll be really big things happening over the next couple of days that I can’t write about until Monday, law of the universe, right? 😑

If you find Crypto is Macro Now useful, would you mind sharing it with your friends and colleagues? ❤

IN THIS NEWSLETTER:

• An economy check-in

• South Korean crypto ETFs

• AI vs Bitcoin power guzzlers

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WHAT I’M WATCHING:

An economy check-in

This week has several key economic data drops, but is not expected to be quite as dramatic as others we’ve experienced recently.

The big number comes on Friday, with the US Personal Consumption Expenditures (PCE) index for May. This is the Fed’s preferred inflation measure, as it covers a broader population and adjusts more rapidly to consumption patterns. Of special interest to central bank officials is the core PCE which strips out the more volatile (and less sensitive to monetary policy) components of food and energy.

The consensus forecast for core PCE month-on-month growth is for a deceleration to 0.1%, from 0.2% in April. Estimates for this index tend to be relatively accurate, as it largely uses the same data sets as the CPI and PPI indices, so this would continue the deceleration trend of the past few months, perhaps giving the Fed a bit more confidence that rate cuts would not reignite inflation.

(chart via Investing.com)

Or maybe not. Yesterday, Fed governor Michelle Bowman spoke of upside risks to the inflation outlook, largely from fiscal stimulus, loose monetary conditions (yes, even with rates above 5%), and a still-tight labour market. She doesn’t expect any rate cuts at all this year.

On the inflationary conditions, she has a point. Wage growth, going by the quarterly Employment Cost Index (the Fed’s preferred household income indicator), has slowed down but seems to have levelled off and is still a considerable 4.3%.

(chart via the Bureau of Labor Statistics)

What’s more, shipping costs have been shooting up – this mainly affects the prices of goods, which are a relatively small part of the inflation indices, but even services need goods at some stage.

(chart via Trading Economics)

Then there’s the price of oil. The Brent crude benchmark has been heading up sharply over the past month, driven by doubts that OPEC+ will walk back their production cuts after all (representatives are insisting their decision will be “market dependent”) and by concerns that a hot summer will boost demand for air conditioning as well as travel.

(chart via TradingView)

I’m heading off to the airport in a few minutes so I’ll be able to see for myself, but data from US airports suggests that travel demand this summer is likely to beat expectations – the number of TSA screenings is at an all-time high.