Reddit’s debut made a splash, but caution’s still the name of the game in the IPO market

GVZ, or the gold volatility index, witnessed a strong move higher on Thursday as markets digested the recent Fed statement and latest summary of economic projections. The projections invalidated a growing belief in the market that the Fed will be forced to forgo a third rate cut in 2024 due to robust US data and resulted in a dovish repricing in the dollar. 

However, it has not taken long for markets to rally behind the dollar once again – something that is likely to keep the greenback supported into Friday’s PCE data which falls on Good Friday.

The chart below reveals gold’s recent responsiveness to the dollar (DXY) and shorter-term yields like the US 2-year yield. The aggressive move higher corresponded with falling yields and a lower USD but shortly thereafter,

Daily Gold Chart with DXY and 2-Year US Treasury Yields

Source: TradingView, prepared by Richard Snow

POTENTIAL EVENING STAR EMERGES MOMENTS AFTER PRINTING THE NEW ALL-TIME HIGH

An evening star could be emerging as the week came to a close, although the middle candle has a very notable upper wick which is not synonymous with the candle stick pattern. Nevertheless, price action suggests the recent move higher was an overreaction to the Fed news, as prices continued to ease into the weekend.

At the start of the coming week, the prior high of $2146.80 comes immediately into view as an early indication of whether bears may set the tone for the week. It’s a quiet week apart from final Q4 GDP data for the US and UK just to list a few and then on Friday PCE data for the month of Feb is due.

The dollars strong, immediate recovery poses a challenge for further upside for gold over the shorter-term and with few catalysts to choses from next week, gold may consolidate around the prior all time high with a view to trade lower.

Daily Gold Chart (XAU/USD)

Source: TradingView, prepared by Richard Snow

The weekly chart helps put golds multi-week advance into perspective. The week before the one that’s just passed revealed a bit of a slowdown in bullish momentum and the candle relating to the most recent trading week that’s just come to a close, reveals a rejection of higher prices.

‘Hoping isn’t planning’

Federal Reserve Chair Jerome Powell had a rather sunny outlook for the economy after the Federal Open Market Committee projected things are going to keep going: more growth, less inflation and low unemployment. But special contributor Larry Summers said that as much as we can hope for the best, we need a plan for what may be around the corner.

Rather than simply say that current rates are restrictive, the Fed “needs to take a view” on where the long-term neutral rate is, Summers said. “If you don’t know what’s neutral, you don't know how expansionary or restrictive you're being.” And he finds “bizarre” the Fed’s suggestion “that the ultimate neutral rate is 2.6%.” Among other things, Summers cited expansionary fiscal policy, new climate investment, more defense spending and money flowing into chips for the AI revolution. “The neutral rate is far more likely to have a 4-handle on it right now than it is to have a 2-handle,” he said. If Summers is right, those rates aren’t nearly as restrictive as Powell thinks they are.

Bitcoin was falling Thursday and other cryptocurrencies were mixed, with momentum still lacking following a surge in prices earlier this year.

Bitcoin has fallen 0.7% over the last 24 hours to $62,106. The largest cryptocurrency, Bitcoin hit a record high near $74,000 in mid-March amid a surge of interest from new spot Bitcoin exchange-traded funds, or ETFs, but its price has since dropped.

On the face of it, the drop is puzzling, considering that the price should have been supported by the April 19 halving, when Bitcoin’s programmatic monetary policy changed—and the issuance of new tokens in half was cut in half, restricting supply.

One possible reason, according to J.P. Morgan strategist Nikolaos Panigirtzoglou, is that the halving was already priced in. J.P. Morgan analysts already saw Bitcoin as well above their volatility-adjusted comparison to gold, which would imply prices a $45,000 price.

A more bullish explanation could be that previous Bitcoin halvings have led to a more delayed cycle of price rises.

”The recent halving event has led to short-term downward price movements, a pattern observed in previous occurrences. Following this, there is typically a 9–12-month period of upward momentum, leading to the peak of the market cycle,” wrote Matteo Greco, research analyst at Fineqia International, in a recent research note.

Beyond Bitcoin, Ether—the second-largest crypto—was off 0.1% to $3,008.75. The Securities and Exchange Commission is expected to make a final decision on Ether spot ETFs this month. Optimism, however, has been muted for a quick follow-up to the approval of Bitcoin ETFs which sent Bitcoin to all-time highs.

“Market participants anticipate that the SEC will likely withhold approval for these products, despite approving BTC ETFs in January. Concerns over the liquidity of ETH’s spot and futures markets, along with its past classification as a security by the SEC, contribute to the skepticism surrounding swift approval,” wrote Fineqia’s Greco.

Smaller cryptos or altcoins were mixed Thursday, with Cardano down 0.8% and Polygon off 0.5%%, while Dogecoin had dipped 0.1%.

Washington — President Joe Biden on Saturday signed the massive spending package that the Senate approved overnight, avoiding a partial shutdown of the government and ending a monthslong fight over spending that persisted six months into the fiscal year. 

The package fully funds the government through September 2024. 

The Senate approved the $1.2 trillion package, which was unveiled early Thursday in a vote of 74 to 24. Hours earlier, it advanced out of the House in a 286 to 134 vote. 

The Senate slipped past the deadline after an hourslong standoff on amendment votes. Shortly before midnight, Senate Majority Leader Chuck Schumer, a New York Democrat, announced the upper chamber had finally reached an agreement that would allow them to expedite the bill's passage. Republicans demanded votes on amendments in exchange for speeding up the process. Without an agreement, the soonest the Senate could vote is Sunday.

The missed deadline was not expected to have any effect on government operations. The White House said agencies would not shut down and could continue their normal operations, since it was clear that a resolution was imminent and that President Biden would sign the bill. 

TOKYO (Reuters) - Japan's economy likely contracted an annualised 1.5% in the January-March quarter as all key drivers of growth slumped due to an uncertain outlook, a Reuters poll showed, which will probably set back Bank of Japan efforts to raise interest rates.

Cabinet Office data due out at 8:50 a.m. on May 16 (2350 GMT on May 15) is expected to show the economy's contraction would be equivalent to quarterly decline of 0.4%, according to the poll of 17 economists.

The decline followed growth of 0.4% annualised in the last three months of 2023, with the main pillars of GDP collapsing and leaving no growth engine for the January-March quarter.

"The trend of thrifty consumers remains strong due to rising living costs likely being exacerbated by the yen weakening," said Takeshi Minami, chief economist at Norinchukin Research Institute, who predicted the overall economy would contract at 1.2% annualised in the January-March period.

Private consumption, which makes up more than 50% of the economy, likely fell 0.2% in the quarter as consumers tightened belts to guard against the rising costs living.

The earthquakes that struck the Noto peninsula at the start of this year also undermined output and consumption. As well, a scandal at Toyota's compact car unit Daihatsu led to the suspension of output and shipments.

Capital expenditures also fell 0.7% quarter-on-quarter as companies remained slow to invest their hefty profits in plants and equipment, such as labour-saving technology to overcome labour shortages.

External demand, or net exports, which means shipments minus imports, likely shaved 0.3 percentage points off GDP growth. Domestic demand probably fell for a fourth straight quarter.

The corporate goods price index, a key gauge of prices corporations charge against each other, probably rose 0.8% in April year-on-year, keeping the pace unchanged from March.

The CGPI data will be released at 8:50 a.m. on May 14 (2350 GMT on May 13).

The CGPI, broadly equivalent to wholesale prices, likely rose 0.3% month-on-month in April, accelerating slightly from the 0.2% rise for March, underscoring persistent inflation that is boosting the costs of living and doing business.

(This story has been refiled to say quarterly decline, not monthly, in paragraph 2)

(Reporting by Tetsushi Kajimoto; Editing by Tom Hogue)