Caution: Printing in Progress

Ian Reynolds January 25, 2025

Financial markets seem cautious. A week of Trump has seen a lot of executive orders but no actual action. The FED's liquidity programs are still, Reverse Repo down to nothing, BTFP has almost finished now, only a small Overnight Repo. Stock markets applauded a new business friendly President but ended the week distinctly muted. Bond yields ticked back up again and we're waiting for the next refunding announcement, normally on the first Wednesday of February.

It's the FED monetary policy meeting this week. Guidance from the last meeting was small rates cuts possible in 2025 and now Trump is demanding rate cuts.

Trump demands Fed cut rates, claims better monetary policy understanding [Reuters]

The only way for the FED to retain it's integrity is for them to hold rates steady, adopt a more dovish tone but to invent a new liquidity program to buoy markets and fend off trump. That is, their view of their integrity.

In reality markets have already lost all faith in the FED and know already that they're political.

In the last 20 years the FED have had the economy totally wrong, they and we know it. And as usual the only recourse for them is to print more USD.

That's why Gold and Bitcoin are at all time highs.

Breaking

Constitutional amendment to allow Trump third term introduced in the House [CNBC]

Trump in fiery call with Denmark’s prime minister over Greenland [FT]

How small Chinese AI start-up DeepSeek shocked Silicon Valley [FT]

Mexico and Canada forge united front in face of Trump’s tariff threats [FT]

United States

Michigan Survey on Friday afternoon suggested the US consumer is feeling less confident of the economy but also has expectations of elevated inflation.

University of Michigan Consumer Sentiment January 2025

The USD rally since October has broken down

USD INDEX FUTURES Daily

China

A week of holidays in China doesn't mean that there won't be any new stimulus announcements (it's a daily ritual) but at least a weaker USD for now has taken pressure off the Yuan and yields have stopped falling.

Japan

This week's rate hike was fully priced in and the BoJ took advantage of all focus being on Trump, to sneak in hike they have been trying to achieve for a year.

In reality USD / YEN is back in the uptrend and at a rate last seen in 1990.

usd yen-Jan-25-2025-02-13-14-5313-AM

USD / YEN Monthly

And rates are moving to where the BoJ wants them.

Japan 10 Year Government Bond Yield Monthly

Zooming out currency down, rates up in an Emerging Markets situation.

Bank of Japan raises interest rates to highest level in 17 years

Europe

Pretty quiet in Europe as there appears to be a standoff with Trump, or more likely head in sand. Hopefully the ECB will take the lead this week and cut rates further.

Precious Metals

Gold looking to go back to the all time high

gold-Jan-25-2025-12-32-42-9712-AM

Gold Daily

Bitcoin (& Crypto)

Finally the executive order freeing Crypto from the shackles of the SEC and bring into life a Bitcoin reserve. You can see the whole EO here {White House]

It is a significant advancement of the money of the future for sure, but in context of the hype around it, a little bit disappointing.

SEC revokes unpopular banking rule that blocked Wall Street banks from adopting crypto [CNBC]

In The Background

CRE / Banks / CLOs

Everything is for sale in office land.

Canada

You have to hand it to the Loonie, it's done pretty well considering Canada has a caretaker Governor (I mean Prime Minister of course), market looking for lower rates and Trump threatening 25% tariffs as at 1st Feb. Still looks like forming a rectangle with continuation higher at some point.

usd cad-4