📝10/21 ~ 10/27 This week's key information update:
Key decisions for Q4 are on the horizon in the coming weeks! The Federal Reserve's beige book report on Thursday, discussions from the Bank of Japan, and PMI data from various countries are the key points to watch this week. Additionally, next week there will be the Bank of Japan's interest rate meeting and the U.S. elections at the beginning of November! 🐂🎢
Given the current market atmosphere, Trump has a strong chance of winning, and this time the Republican Party may win a majority in Congress (as shown in Chart 1, commonly referred to as a Red Sweep). This will make it easier for Trump’s policies to be implemented, such as those related to energy, tariffs, and cryptocurrencies (FIT21), which may see positive progress next year. Moreover, the U.S. debt deficit may continue to expand, meaning the U.S. government will need to issue more debt to meet its spending goals. Long-term U.S. bonds have already reflected these expectations (Chart 2).
If the Republicans win (especially under Trump's leadership), significant tax cuts for individuals and businesses are expected, a stronger enforcement of dovish monetary policy, and further incentives for companies through the elimination of regulatory red tape. At the same time, we can see that the market expects spending under Trump to be more than double that of Harris (Chart 3). In this scenario, it is anticipated that the stock market and commodities will perform better than bonds (including cryptocurrencies), making 2025 potentially very exciting.
Recently, the U.S. dollar has been boosted by weak economic data from Europe, with institutions expecting the Eurozone and the UK to possibly cut interest rates again in November. The CPI data from the EU and the UK fell to new lows in September, nearing policy targets (Charts 4, 5). The next step is to compare whose economy is performing better to determine the strength of the exchange rate (worth paying attention to this Thursday). In Japan, the October data showed that trade exports were significantly impacted by exchange rates, not meeting expectations, while other data such as unemployment rate, consumer confidence, and inflation showed good performance (Chart 6). Currently, institutions mostly expect that due to political instability and the U.S. elections, the probability of an interest rate hike at the end of this month is low. Thus, attention should be paid to the central bank's speech on Thursday. If the Bank of Japan maintains the interest rate at the end of the month, it would have a positive impact on the market; conversely, if there is another rate hike, there may be short-term risks of a decline.
Coinbase's institutional report reveals the outlook for the fourth quarter, with Ethereum regaining market share in transaction fee revenue.... For more, follow my TG channel @kenjisrealm_c
