Mati Greenspan, Senior Market Analyst at FX broker eToro, has provided his daily commentary on traditional and crypto markets for June 19, 2019. The text below is an excerpt and does not contain the full analysis.
One major factor of uncertainty may now be removed from financial markets, possibly paving the way for a prolonged period of exceptional stability for investors.
President Donald Trump has officially kicked off his 2020 presidential campaign.
From now until November 2020, Donald J Trump is likely to be on his best behavior, at least as far as the markets are concerned.
Today’s Highlights
- President Trump kicks off re-election campaign: As President Trump kicks off his presidential re-election campaign, the unpredictable politician will most likely moderate his behavior with an eye to the markets, at least until November 2020.
- Federal Reserve interest rate decision slated for 2 PM ET: Today marks the delivery of the Federal Reserve interest rate decision at 2 PM ET. Stocks have already been within range of their all-time highs in anticipation of a rate hike.
- Libra Coin: Facebook announced its first cryptocurrency yesterday, a stable coin referred to as Libra coin, to colossal news coverage. XRP and XLM will note that the Libra tech is similar, but responses from foreign and domestic politicians may put a stop to Libra before it’s even out of the gate.
- Sell the Libra News? Bitcoin experienced a massive run-up ahead of the Libra news, but it many may decide to “buy the rumor, sell the news.”
Please note: All data, figures & graphs are valid as of June 19th. All trading carries risk. Only risk capital you can afford to lose.
Traditional Markets
The long-awaited and much-anticipated Federal Reserve interest rate decision will be delivered at 2:00 PM New York Time followed by a special press conference with Chairman Jerome Powell at 2:30.
The markets have been salivating lately over the extremely dovish turn the Fed has taken lately and the stock market is within range of its all-time high once again.
Will the markets get everything they want from the Fed today? From the way I see it, it doesn’t seem likely. Don’t get me wrong. Markets rarely drop when Powell is talking, but somehow it seems that the Fed can’t get any more dovish without raising some serious alarm bells.
It’s important to note that even though stocks are on a tear, fund managers are still quite pessimistic. Analysts from Bank of America have recently concluded that the markets are the most bearish they’ve been since the financial crisis.
Which of course, is being taken as a positive sign by many pundits who say that they can’t get much more bearish so the next move must be bullish.
This chart from Bloomberg shows pretty clearly how portfolios are currently much less into risky assets and much more into safe havens then they usually are.
In any case, it will be an interesting event today.
Libra’s Wake
To be perfectly honest, I was really wrong about yesterday’s Facebook announcement. My feeling was that we would get a small press release or blog post confirming which of the widespread rumors were true and which were not.
Instead, we received a massive data dump with plenty of documentation and even an early look at the opensource code of the new ‘blockchain’.
As far as it seems, the tech is very similar to that of XRP or XLM. At this point, I wouldn’t say that the former has much to worry about but the latter might be in a spot of trouble. Stellar Lumens’ main market is remittances, the exact market that Libra aims to disrupt.
To be clear, this new product is no competitor to bitcoin. Bitcoin is open, borderless, censorship-resistant, and immutable, and fully decentralized in all aspects of the network. Libra is not.
With all the seemingly good intentions from Facebook, there’s even a fair chance this project never gets off the ground. Within hours of the data release, French Finance Minister Bruno Le Maire presented some serious opposition. Not only that, it seems that even US lawmakers may not be 100% onboard and some called for a complete halt of the project pending further details.
Even though this is a stable coin, many people are quite bullish. So it’ll be interesting to see this play out.
Sell the News?
Over the last few weeks, many clients and journalists have asked me just how much of the current rally in bitcoin is due to Facebook’s new crypto?
Well, I couldn’t exactly say but we should get a clearer picture in the next few days. As the old market saying goes, “buy the rumor, sell the news.”
Well, here we can see the massive run up on bitcoin. The blue circle is where Techcrunch announced the release date of the white paper two weeks ago, the yellow line is when the time the white paper was released.
So, depending on the size of any potential pullback we might be able to get a good idea of how much of this is fluff.
Let’s have an awesome day.
Mati Greenspan can be found on LinkedIn, Twitter, or etoro.
This is a marketing communication and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without having regard to any particular investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared utilizing publicly-available information.