US stocks are higher as officials signal they will do whatever it takes to protect the banking system. Treasury Secretary Yellen’s comments at the American Bankers Association conference sparked today’s risk-on mood. Yellen noted that the US banking system is stabilizing after strong actions from regulators, but further steps to protect bank depositors may be warranted if smaller institutions suffer deposit runs that threaten more contagion. Deputy Treasury Secretary Wally Adeyemo also noted that the Treasury is considering how to further strengthen financial stability. Wall Street appears confident that the Fed is poised to deliver one more rate hike tomorrow.
It is a clear message from multiple officials that they are not taking this banking turmoil lightly and that they will probably be proactive when the next major risk arises.
Crude prices are rallying as global financial turmoil eases and as Russia signals they will keep its oil output at reduced levels for a few more months. The oil market was oversold and obviously once some major bullish bets were fully unwound, prices were ready to stabilize.
Oil’s rally could struggle if the Fed remains confident with the outlook, which might suggest they might not be one and done with rate rises.
The music stopped and gold’s rally died. Wall Street is playing Dr. Jekyll and Mr. Hyde and now very confident that authorities all over the world will make sure banking turmoil will not spread like wildfire. Gold was ripe for profit taking after rallying above the $2000 level and ahead of the FOMC decision. Profit-taking might not last beyond the Fed as investors are lacking conviction with their Fed bets.
It is hard to imagine Wall Street will remain aggressive with risk appetite post-Fed if they revise their inflation forecasts significantly higher and slash their growth targets. The Fed will most likely signal they will break this economy and that should provide a good reason for some investors to remain defensive, which should benefit gold.
Bitcoin is on standby for the FOMC decision. Wall Street is riding a risk-on wave as banking fears and that is proving some support for the altcoins. Crypto traders might not see a major move until we see what happens with the Fed’s decision on rates and their forecasts.
Risk appetite is rallying on optimism the Fed is almost done with tightening and that they will help prevent financial stability concerns from getting out of hand. A lot needs to go right for this risk-on rally to continue and that might be why Bitcoin is struggling to break away from the $28,000 level. A lot of traders are eyeing the $30,000 level for Bitcoin and depending on how price reacts there, momentum flows could support a 5% move in either direction. If the Fed doesn’t spark a rally, Bitcoin could settle closer to the $25,000 region.
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