What’s happening: Bitcoin climbed more than 2% over the weekend and another 1.46% this morning.
What happened: Bitcoin prices surged past the previous peak to hit another record high of 104,621, ahead of interest rate decisions by major central banks due this week.
Bitcoin was supported by President-elect Donald Trump officially confirming plans on Friday to create a strategic reserve of the leading crypto currency.
Why it matters: The US Federal Reserve and the Bank of England are gearing up to announce their interest rate decision this week.
The Fed, which is scheduled to announce its monetary policy decision on Wednesday, is widely expected to cut interest rates by 25 basis point (bps). Expectations of weakness in the US dollar due to increased rate cut speculations supported Bitcoin because a lower greenback raises concerns around fiat currencies, while also making the BTC/USD cheaper for foreign currency holders.
In its final meeting of the year, the Bank of England is expected to keep rates on hold at 4.75%. The European Central Bank (ECB) already announced its decision to cut its key interest rates by 25 bps last week, in-line with expectations.
Donald Trump, who had strongly maintained a pro-crypto stance through his election campaign, proposed on Friday to create a national reserve of Bitcoin akin to US gold and oil reserves. Trump said in an interview with CNN, “We’re gonna do something great with crypto because we don’t want China or anyone else getting ahead.”
Republican Senator Cynthia Lummis proposed a bill for the BITCOIN Act, which takes the name of the leading crypto as an acronym for Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide. The Act, if passed, would lead to the purchase of 1 million Bitcoins by the US over the next five years to help reduce the country’s $35 trillion national debt.
Although Trump’s comments and the proposed bill attracted criticism from several economists, it has lent support to Bitcoin prices.
Bitcoin prices climbed 2.9%, adding more than $2,000, to $103,203 on Sunday night. The world’s largest cryptocurrency added 1.46%, or around $1,500, to reach a record high of 104,621 this morning.
What to watch: Investors will watch comments from Fed officials about the pace of the US central bank’s rate cuts next year. Markets will also monitor further comments by Donald Trump.
Context: Asian markets traded mostly lower this morning, after a slew of data releases from China and Japan.
Details: Asian markets closed mostly lower on Friday, with the Asia Dow down by 1.46%, Japan’s Nikkei 225 by 0.95%, Hong Kong’s Hang Seng by 2.09% and China’s Shanghai index by 2.01%. India’s Sensex bucked the trend to climb 1.04%.
Japan’s core machinery orders, excluding for ships and electric power companies, rose by 2.1% to ¥869.8 billion in October, after three consecutive months of decline. The figure also came ahead of market expectations of 1.2% growth.
The au Jibun Bank Japan’s flash composite PMI improved to 50.8 for December, from 50.1 in the previous month. It represented the second consecutive month of growth in private sector activity and the strongest growth since September. The composite PMI was driven mostly by services, with manufacturing remaining in the contraction zone.
However, China’s disappointing data releases exerted pressure on risk sentiment. China’s new home prices shrank for the 17th straight month, by 5.7% year-on-year in November. This followed October’s 5.9% decline, the steepest in around nine years.
China’s industrial production expanded by 5.4% year-on-year in November, modestly surpassing market expectations of 5.3%.
China’s retail sales growth decelerated to 3% year-on-year in November, from 4.8% growth in the previous month. The figure also came in significantly short of market expectations of 4.6% and was the weakest growth since August.
China’s unemployment rate came in unchanged at 5% in November, in-line with market expectations.
Asia Dow declined by 0.35% to 4,158.10, Nikkei 225 by 0.04% 39,455.51, Hong Kong’s Hang Seng by 0.57% to 19,856.91 and India’s Sensex by 0.09% to 82,055.77 this morning. China’s Shanghai recovered some of Friday’s losses and rose by 0.10% to 3,395.11.
What to watch: The Bank of Japan is to announce its rate decision on Thursday, with speculations swinging between policymakers holding the benchmark interest rate steady and raising it.
Other Markets: European indices were trading lower this morning, with the DAX 40, CAC 40, STOXX Europe 600 and FTSE 100 down by 0.10%, 0.15%, 0.53% and 0.14%, respectively.
President Volodymyr Zelenskyy said that Russia had begun using North Korean troops “in significant numbers” in its war with Ukraine. The news sent the RUB/USD pair higher in forex trading this morning.
France’s annual inflation rate accelerated to 1.3% in November, from 1.2% in the previous month. Inflation climbing to the highest in three months sent the CAC 40 down 0.2% on Friday.
Eurozone’s industrial production came in flat in November, after a decline of 1.5% in October and down 2% in September. The contraction halting sent the EUR/USD slightly higher in forex trading this morning.
India’s total passenger vehicle sales grew by 4.3% year-over-year to 300,459 units in November, following 1.1% growth in the previous month. The acceleration in growth lent support to the INR/USD forex pair.
Saudi Arabia’s annual inflation rate accelerated for the fourth consecutive month to 2.0% in November, from October’s 1.9%. Despite this being the highest reading since August 2023, the SAR/USD remained broadly flat in forex trading this morning.
Philippines’ Business Confidence (1200 UAE Time), France’s Composite PMI Flash (12:15 UAE Time), Eurozone’s, Composite PMI Flash (13:00 UAE Time), ECB Survey of Monetary Analysts (13:30 UAE Time), Labour Cost Index (14:00 UAE Time), and Wage Growth (17:15 UAE Time), UK’s Composite PMI (13:30 UAE Time), Canada’s Housing Starts (17:30 UAE Time) and US NY Empire State Manufacturing Index (18:00 UAE Time) and Composite PMI (18:45 UAE Time).