European markets are in the red on Thursday in what continues to be a choppy week of trading driven by economic and interest rate uncertainty.
We’re now at a pivotal point in the tightening cycle, one made all the more difficult by the mini-banking crisis last month and the ripple effects it will have on credit and the economy throughout the rest of the year.
Central banks, particularly the Fed, are now at even greater risk of overtightening just as the data may show price pressures easing considerably. The fear of that not materializing will probably drive another round of rate hikes next month, after which discussions will likely be far more balanced.
This uncertainty appears to be driving the most recent period of choppy trading, especially when the economic data is not yet playing ball; the UK this week is a prime example of that. Justifying a pause in tightening when inflation is above 10% on the belief it will fall rapidly after being terribly wrong about it being transitory not long ago is tough, and I’m not convinced central banks have it in them or feel there’s enough credit in the bank to take the risk. It’s going to be an anxious couple of months.
The ECB decision-making is made slightly less complicated because interest rates haven’t risen quite as far after being so late to the party, and the minutes may well reflect that. Of course, they may also highlight anxiety within the committee in relation to the proximity of the meeting to those bank failures.
Are we finally seeing profit-taking in bitcoin?
Bitcoin is slipping again on Thursday after breaking back below $30,000 a day earlier, following a few choppy days of trade. It’s now seeing some support around $29,000 where it saw resistance in late March and early April but after such a prolonged rally since early January – more than 80% – the recovery may be running on fumes.