A decent start to the week

One eye on the Fed

Stock markets are off to a decent start at the beginning of the week, one that will be heavily focused on US economic data ahead of the September Fed meeting.

In many ways, it feels a little early for there to be so much attention on the meeting next week and yet, it very much seems that is what is happening. The jobs report a couple of weeks ago threw a massive spanner in the works as far as tapering is concerned but the message coming from policymakers suggests they remain undeterred.

Now that we’re into the blackout period, we’ll have to rely on the data to form our opinions on what the Fed will decide next week and in the final months of the year, starting with the inflation readings on Tuesday.

Any indication that inflation is not as transitory as the central bank currently believes could pile on the pressure to remove stimulus more aggressively and cause some distress in the markets, something investors are very sensitive to.

Central banks are being extremely cautious though and are keen to point out that the removal of emergency stimulus measures is not linked to future rate hikes.

The ECB took its foot slightly off the gas last week in what was viewed as a first step towards removing stimulus. It was a cautious first move but perhaps a sign that policymakers are wary about higher inflation.

Bitcoin testing major support

Bitcoin is coming under pressure once more on Monday, a little under a week after it plunged 17% following its debut in El Salvador.

Once again, the cryptocurrency finds itself close to $44,000 where it has previously found strong support. A significant break of this level could be bad news for bitcoin in the near term.

For weeks now, it has been showing signs of topping out, with rallies lacking momentum and the lows being repeatedly tested. A break of $50,000 may have improved its fortunes, alongside it being adopted as legal tender in El Salvador – a massive experiment for the country and bitcoin – but instead, it quickly crashed and it’s struggling to find its feet.

You can’t write off bitcoin, not when there’s so much excitement in the space, but a break below $44,000 could be troublesome. Even another 20% would leave it well above the lows it reached earlier this summer so we shouldn’t get too carried away. Maybe Elon Musk will ride to the rescue again.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.