*Fed Minutes confirm half\-point hike expectations for next two meetings, Another round of soft US data, RBNZ hikes again, Oil higher, Gold pares losses after Minutes, Bitcoin stuck below $30k – OANDA
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US stocks edged higher as investors anticipate a quickly weakening economy will force the Fed into tapping the breaks with their tightening cycle. The FOMC minutes are over three weeks old, but they did give a glimmer of hope that they could adjust their policy tightening stance later in the year. The Fed mostly sees 50 basis point increases appropriate at the next couple of meetings as they are behind the curve with fighting inflation. The Fed is optimistic about the economy, but they are growing concerned with markets for Treasuries and commodities.
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US Data
The headline durable goods reading for April came in softer-than-expected and the prior month was revised sharply lower. Supply chain woes continue to trouble factories, but business investment remains intact. Capital goods shipments rose more than expected which should point to stronger growth later this quarter.
Another economic data release that confirms the economy is weakening, but still not enough to change the Fed’s rate tightening path over the next couple of policy meetings.
RBNZ
The Reserve Bank of New Zealand is taking inflation very seriously and continuing with an aggressive tightening cycle despite a highly uncertain global economic environment. The central bank delivered its fifth straight rate hike, with this one being the second consecutive 50 basis point increase.
The Official Cash Rate now stands at 2.00% and is poised to go much higher. The statement noted, “It remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and support maximum sustainable employment.”
The RBNZ is positioning itself nicely to have ammunition when the next downturn happens. China’s economic difficulties are troubling and economic weakness could spillover the next quarter. Inflation is at three-decade highs, but should be peaking soon, so the central bank knows now is the time to get these rate hikes in. It will be much harder to tighten aggressively once domestic consumer confidence is sharply lower in a few months time.
Oil
Crude prices were little changed after the EIA crude oil inventory report showed stockpiles are declining again as refiner activity picked up. The Strategic Petroleum Reserve saw a big draw of 6 million barrels, with crude stocks now at the lowest levels in over thirty years. Gasoline demand was a little soft, but energy traders are not too worried that we are seeing crude demand destruction just yet even as gas prices are making record highs. The beginning of the summer driving season is here and the pent-up demand for travel is so high that Americans will travel regardless of the price at the pump.
The oil market remains tight and crude prices seem like they will continue to be supported.
Gold
Gold prices pared losses after the Fed’s Minutes signaled, they are not considering larger rate hikes. The Minutes included a boosting of the inflation forecast which could be viewed as hawkish, but risks are growing in parts of the Treasuries and commodities markets and that could derail much more aggressive action.
Given today’s strong dollar, gold looks like it is ready to consolidate, but a bearish outlook seems unlikely.
Bitcoin
Bitcoin continues to follow the lead set by equities as confidence in cryptos wane. Guggenheim Partners CIO Minerd, a well-known crypto sketpic delivered another bearish call that Bitcoin could fall to $8,000. His skepticism is always expected but it does coincide when inflows into cryptos are at recent lows.
Bitcoin is struggling to advance above the $30,000 level and that will be a troubling sign if equities continue to stabilize. If selling pressure resumes and the earlier lows made this month around $25,424 are breached, there isn’t much support until the $20,000 level.
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