Closing changes today:
On the month
Year-to-date gains fall in the 3.5% (UK) to 25% (Italy MIB) range. The early part of July saw equity selling on interest rate concerns but that reversed late in the month. The FTSE 100 traced out an outside month as a result:
The Stoxx 600 also traced out an outside month and closed at the best levels of the year.
In the bigger picture, Italy is starting to look intriguing after many years where money wouldn’t even consider going there. Economic growth has surprised to the upside this year and it’s still cheap at around a 9-10 trailing p/e.Full Article
XRP holder community is awaiting the US Securities and Exchange Commission’s (SEC) next steps to appeal versus Judge Torres’ ruling on XRP status as a security. Amidst the anticipation surrounding the ruling, pro-XRP attorney John Deaton has made more comments on the recent information about the SEC lawsuit against Coinbase.
Deaton explained the relationship between the XRP ruling and the crypto ecosystem, arguing that no cryptocurrency is safe from the SEC’s anti-crypto stance.
Coinbase CEO Brian Armstrong told the Financial Times in an interview that the US SEC requested the exchange to halt trading for all cryptocurrencies except Bitcoin. Armstrong said that the SEC believes every asset other than Bitcoin is a security and that the regulator refused to explain how the agency arrived at such a conclusion.
The request was to delist from the biggest cryptocurrency exchange in the world every asset other than Bitcoin. Deaton used these words by Armstrong to remind the XRP community how important Judge Torres’ ruling is. According to Deaton, all cryptocurrencies in the ecosystem are “in danger” of the full-force of the SEC coming at them, if XRP was proven to be an investment contract/ security.
The ruling makes it clear that XRP is not a security in itself, however the altcoin can be considered as a security depending on the circumstances of the transaction or sale. Deaton believes that this XRP ruling is a win for the crypto ecosystem and that the SEC vs Ripple case is “the most significant non-fraud SEC enforcement action in modern history”, since 1946.
John Deaton had already warned the crypto community nearly a year ago that the SEC’s lawsuit against Ripple could emerge as a groundbreaking one, as the regulator’s argument could be applied to every single asset. Deaton wrote to the SEC, asking the regulator to limit their claims against Ripple, to the way the firm sells XRP, instead of a blanket reference to the asset.
— John E Deaton (@JohnEDeaton1) July 31, 2023
The SEC filed its first amended complaint against Ripple on February 19, in the southern district of New York, and the regulator’s response was to refer to XRP as a “digital asset security.” This is where, Deaton explains, the regulator clarified their stance on cryptocurrencies and shifted its stance from 2013 to the present, referring to assets as “securities” instead of referring to the circumstances of sale of the asset.
It depends on the transaction, according to a court ruling released on July 14:
For institutional investors or over-the-counter sales, XRP is a security.
For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.
The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token.
While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.
The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at.
Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say.
Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.
The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation.
While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.
The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.
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Gold price (XAU/USD) discovers support around $1,950.00 as the robust performance of the United States in the April-June quarter was offset by soft consumer spending data. The precious metal is under pressure as the US Dollar capitalizes on upbeat Gross Domestic Product (GDP) numbers and a robust Durable Goods Orders report.
United States factory activities have been contracting for the past eight months due to the aggressive rate-tightening cycle by the Federal Reserve (Fed). The manufacturing sector is broadly expected to continue reporting a vulnerable performance as firms struggle to tap credit due to the twin headwinds of higher interest rates by the Fed and tighter credit conditions among US regional banks.
Gold price remains sideways near the 20-day Exponential Moving Average (EMA) around $1.955.00 as investors shift their focus to factory activities and labor market data. On an hourly time frame, Gold price forms a bearish divergence that will be triggered after a breakdown below the crucial support of $1,940.00. An occurrence of the same would push the Gold price into a bearish trajectory.
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
The Australian Dollar (AUD) recovers against the US Dollar (USD) on Monday, rising back up to a band of major Moving Averages in the 0.6700 zone. The Australian Dollar manages to shrug off downbeat data from its largest trading partner China, helped, perhaps, by a rise in Crude Oil prices, given Petroleum is the country’s second-largest export. The release of lower-than-expected US data in the form of the Chicago Purchasing Managers’ Index further fuels the rally.
AUD/USD trades in the lower 0.67s during the US session.
AUD/USD is in a sideways trend on both the long and medium-term charts. The February high at 0.7158 is a key hurdle, which if vaulted, will alter the outlook to one that is more bullish longer term.
Likewise, the 0.6458 low established in June is a key level for bears, which if breached decisively, would give the chart a more bearish overtone from a longer-term perspective.
Australian Dollar vs US Dollar: Weekly Chart
The confluence of moving averages (MA) close to 0.6700, made up of all the major SMAs – the 50-week, 50-day and 100-day – remains a key support and resistance level. The exchange rate is currently challenging this level from below after temporarily breaking below it on Friday.
Australian Dollar vs US Dollar: Daily Chart
Whether the break was decisive is questionable – Friday’s candlestick is long and red but the close was not as close to the low as would be desirable for a really bearish signal. Nevertheless, it did cleanly breach the level.
With last week’s move down it is possible price may have completed a Measured Move pattern or three wave ABC correction (see labels on daily chart), where waves A and C are of similar length. If so, it is not surprising Monday is showing a reversal higher, although for how long the up move will last, it is impossible to tell.
On Monday price has recovered back up to the 0.6700 area and the cordon of MAs. It would require a decisive break above this level to reinvigorate short-term bullish hopes. Otherwise, the exchange rate has every chance of recapitulating and continuing last week’s bearish tone lower. A break below Friday’s 0.6623 low would revive the short-term downtrend.
Because the pair is in a sideways trend on the higher time-frame charts, the probabilities do not favor one scenario over another – nor is the Relative Strength Index (RSI) providing much insight on either timeframe.
A break below the 0.6623 lows, however, would probably indicate a continuation down to 0.6600 and the June lows, after which a continuation down to the May lows at 0.6460, could be quite possible.
In technical terms, a ‘decisive break’ consists of a long daily candlestick, which pierces cleanly above or below the critical level in question and then closes near to the high or low of the day. It can also mean three up or down days in a row that break cleanly above or below the level, with the final day closing near its high or low and a decent distance away from the level.
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
The Pound Sterling (GBP) faces immense pressure as investors eye the monetary policy of the Bank of England (BoE). The GBP/USD pair struggles to gauge direction as investors worry about deepening recession fears due to aggressive policy-tightening by the United Kingdom’s central bank. To tame stubborn inflation, the BoE is expected to raise interest rates for the fourteenth time in a row.
The Bank of England has already raised interest rates to 5%, and a fresh interest rate hike of 25 basis points (bps) is expected to build more pressure on inflation. Labor shortages and higher food prices have remained major contributors to sticky UK inflation. BoE policymakers are also expected to consider a 50 bps interest rate hike as inflationary pressures in the UK economy are the highest compared to other G7 economies.
Pound Sterling remains back-and-forth below the round-level resistance of 1.2900 as investors shift their focus toward the interest rate decision by the Bank of England. The Cable aims for a firm footing after correcting to near the 20-day Exponential Moving Average around 1.2860. The major trades in a Rising Channel chart pattern and it can discover support after testing the lower portion of the trade pattern.
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
Crude oil output of OPEC (Organization of the Petroleum Exporting Countries) declined by 840,000 barrels per day (bpd) from June to July to 27.34 million bpd, a Reuters survey showed on Monday.
During that period, Angola and Nigeria reportedly failed to reach the agreed oil output and Saudi Arabia reduced its production by 860,000 as part of its voluntary output cut. Increases in Angola and Iraq’s outputs, however, limited the decline in the organization’s total output.
Crude oil prices continue to push higher following this headline. As of writing, the barrel of West Texas Intermediate was trading at its highest level since mid-April at $81.60, gaining 1.2% on a daily basis.Full Article
The Securities and Exchange Commission (SEC) continued its crypto crackdown in Q3 but decided to go after an influencer and entrepeuner over a company. Interestingly, the lawsuit filing came hours after reports of Coinbase CEO, Brian Armstrong, claiming that the SEC stated to them that, except for Bitcoin, every crypto asset is a Security.
The SEC sued the popular crypto content creator, Richard Heart, founder of Hex and Pulsechain, on Monday. Per the reported filing, the crypto advocate has violated Securities laws by raising $1 billion through unregistered offers and the sale of crypto assets.
According to the SEC lawsuit, Heart seems to have engaged in three separate offerings – Hex, PulseChain and PulseX. According to SEC, each of them is a crypto asset security created and managed by Richard Heart.
SEC filing against Richard Heart
Additionally, the SEC also stated in the filing that Heart seemingly inflated the value of “securities” sold to retail investors. The filing noted,
“Heart continually touted these investments as a pathway to grandiose wealth for investors, claiming that Hex, for example, ‘was built to be the highest appreciating asset that has ever existed in the history of man.
Furthermore, the SEC charged Heart and PulseChain with fraud for misappropriating at least $12 million of offering proceeds to purchase luxury goods.
Since the filing was announced, HEX price has fallen by nearly 11%, bringing the decline in the last three days to 20.36%.
HEX/USD 1-day chart
The SEC announced the Hex lawsuit hours after reports of an interesting statement from the regulatory body surfaced. According to the CEO of Coinbase, Brian Armstrong, the SEC told Coinbase to halt the trading of all crypto assets except for Bitcoin prior to suing them. In an interview with Financial Times, Armstrong stated,
“They came back to us, and they said . . . we believe every asset other than Bitcoin is a security. And, we said, well how are you coming to that conclusion, because that’s not our interpretation of the law. And they said, we’re not going to explain it to you, you need to delist every asset other than Bitcoin.
Thus, by the looks of it, the SEC is potentially set to pursue any and every crypto asset and company it can, except for those associated with Bitcoin, in the ruse of violation of securities laws since they claim all crypto assets apart from BTC is security.
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Coinbase’s Layer 2 blockchain BASE is not officially live yet, however, it’s important to note that crypto degens turned profits trading meme coins and bridging them to the Layer 2 chain overnight. BALD is one such meme coin that has yielded three-digit gains to holders since July 30.
Crypto analysts on Twitter speculate that the meme coin’s meteoric rise involved Coinbase insiders because of their large cbETH holdings.
Crypto X (formerly Twitter) was abuzz with calls for “BALD,” a newly launched meme coin on the Leetswap exchange. While Base network is not live yet, there is a large volume of assets locked in the blockchain. Hordes of newly launched tokens like BALD have flooded the blockchain since July 30.
On-chain analyst behind the Twitter handle @0xReflection analyzed a whale wallet that turned $9,800 to $815,000. The analyst notes that the first few “insiders,” meaning whales that bought BALD at prices as low as $0.0005, turned profits higher than 8,000%.
In just 18 hours, this #crypto wallet went from $9,8k to $815k ♂️
Insider’s first to uncover $BALD & boosted his balance by 8173% !
Let’s dive in his trades I’ll show his next x100 gem pic.twitter.com/b8IhY0vWG7
— Reflection (@0xReflection) July 30, 2023
The trend of meme coin calls on social media platforms and surge in trade volume and profitability overnight mostly consists of “hype” and “speculation.” These factors drive Fear, Uncertainty and Doubt (FUD) among holders, with large groups of whales scooping up the token and “dumping” or selling off in massive quantities across exchange platforms.
Traders are advised to perform their due diligence before engaging in trade of meme coins and newly launched tokens, given they are largely driven by crowd speculation.
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WTI crude oil is up another $1.07 today as it builds towards a sixth-consecutive week of gains. It’s trading at $81.61 and near the highs of the day after Reuters’ survey of OPEC production showed a drop of 860K bpd.
The bulk of that is the 500kbpd Saudi voluntary cut, which has been extended through August (but not yet Sept) and the Saudi cut isn’t a surprise. The bigger twist is from Nigeria, where output fell 120k bpd due to a potential leak at a Shell export terminal and a brief stoppage due to a protest.
In total, Angola and Nigeria are both producing far below quotas with the UAE and Saudis producing slightly above.
This survey doesn’t include Russia but indications are that they have lowered exports in July as promised, or are headed in that direction.Full Article
The Reserve Bank of Australia (RBA) will announce its next Interest Rate Decision on Tuesday, August 1 at 04:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of 10 major banks regarding the upcoming central bank’s decision.
RBA is expected to hike rates 25 bps to 4.35%, the highest level in more than a decade. At the last meeting, the bank left rates steady at 4.10% and some analysts look for steady rates after the latest Australian economic data.
We expect the RBA to leave the cash rate unchanged in August. While we won’t completely rule out an August hike, we think the case for a pause is stronger: inflation is moderating faster than the RBA expected, consumer spending is slowing, and the RBA described monetary policy as ‘clearly restrictive’, in its recent minutes.
We expect the RBA to resume hiking by 25 bps though it is a fairly close call with analysts almost evenly split on the decision and OIS only pricing in 20% chance of a hike. To justify a hike, the RBA could use the updated economic forecasts to highlight upside inflation risks from the red-hot labour market, rebound in housing activity and strong population growth.
The RBA can use the latest inflation data as an excuse to leave the cash rate target unchanged at 4.1% this month. Our current thinking is that the bank will maintain rates at the current level until September, which could respond to inflation backtracking higher, or just not making sufficient downward progress. The latest data from the Australian Bureau of Statistics shows that the CPI for the second quarter fell to 6.0% YoY, lower than the 6.2% consensus. This is also the lowest quarterly rise since September 2021. As both headline and trimmed mean inflation are now below the central bank’s forecast, this gives it a good reason to believe that it is time to stop.
We expect the RBA to maintain its cash rate target of 4.10% which would mark a two-month ‘pause’ since the July meeting. The policy statement is unlikely to differ much from July. It will probably suggest that the tightening cycle has not yet ended, and cite developments in the global economy, trends in household spending and the outlook for inflation and the labour market as the key factors influencing policy decisions. We maintain our base-case scenario that the RBA will implement one more 25 bps hike toward a terminal policy rate of 4.35%.
Although we expected the last two rate hikes, the most recent decision to pause was a surprise. With inflation cooling in recent months, but still well outside the 2%-to-3% target and retail sales slumping, we judge that the central bank is nearing the end of its rate hike path. Once again, we will go against consensus. We look for the RBA to finish off with a more moderate rate hike of 15 bps; but given the unpredictability of Governor Lowe, will not be shocked if we are wrong.
The RBA is expected to hike by another 25 bps this week in its August Monetary Policy Board meeting though we do see a risk that the Bank may once again pause to re-assess impact of the current hikes to date. Friday’s weaker-than-expected Australia retail sales result and Q2 CPI earlier in the week certainly increase the odds of a hold. But upward revisions to wages and employment, but minimal revisions to inflation could imply at least two more rate hikes.
We think Australia’s central bank could hold its policy rate steady for a second straight meeting at 4.10%. While it is possible the peak in the policy rate has already been reached, the outlook remains fluid, and we remain flexible. In particular, if progress with respect to slowing price and wage inflation were to stall, the RBA could easily resume hiking rates in the months ahead.
The RBA will raise the cash rate by 25 bps to 4.35%. Given the lasting stickiness in services inflation, the RBA should take out more ‘insurance’ with a 25 bps increase in August, reaching a terminal rate of 4.35%. Thereafter, the Board can retain a tightening bias while assessing inflation’s downtrend and the evolution of risks.
We expect a hold while retaining a tightening bias.
The RBA is aware that rates are ‘clearly restrictive’, and there is a chance they remain on pause at 4.10%. However, we look for a further 25 bps rate hike, keeping in mind that inflation rates remain substantially above the RBA’s target band of 2-3%. The decision will nonetheless be a close call.
I have been looking for green shoots in manufacturing after a tough year and there are some emerging but not in this report. The forward looking metrics largely worsened.
The comments in the report are often insightful:
Computer and electronic product manufacturing
Fabricated metal product manufacturing
Primary metal manufacturing
Printing and related support activities
Textile product mills
Gold has been oscillating within a confined range between $1,945 and $1,987. Strategists at the Bank of America analyze XAU/USD technical outlook.
The price action of gold in the period from May to July is increasingly resembling a ‘head and shoulders’ base pattern. This pattern is typically a bullish reversal pattern that indicates a potential shift from a downtrend to an uptrend.
If Gold can rally and break above the $1,987 level in the next five trading sessions, it would reinforce the belief in the ‘head and shoulders’ base formation, potentially indicating a move upwards to the $2,070 level.
Should Gold drop below the $1,945 level, we see a risk that prices might descend to retest their lows or the 200-Day Simple Moving Average (SMA), which hovers around the $1,900 mark.