Wednesday's Markets Update (January 29, 2025)

29 Jan 2025 by rate3

On Wednesday, stocks closed in the red as the Fed kept rates steady, followed by Powell's hawkish comments, noting steady growth and a strong labor market but omitting previous remarks on inflation progress. Nvidia slid amid concerns about AI competition, while T-Mobile surged on strong earnings. The trade deficit hit ATH due to pre-tariff stockpiling. Gold holds near its ATH in anticipation of expected easing from the ECB. BTC (103K), ETH (3.1K), and SOL (231) wobbled around their weekly lows without notable progress, despite a short spike triggered by Powell's statement that it is up to banks to decide whether to serve the crypto market.

Details

Powell maintained the fed funds rate at 4.25%-4.5% in January, pausing after three 2024 cuts totaling 1%. Chair Powell emphasized no rush to lower rates, citing solid economic growth, stable unemployment, and elevated inflation. 1Y trend: "Down" (Fed)
The trade deficit in goods hit a new record $122.11B in December, surpassing forecasts of $105.4B and rising from November's revised $103.5 billion. Imports jumped 3.9% to $289.6B, likely due to pre-tariff stockpiling, with gains in industrial supplies, consumer goods, and capital goods. Exports fell 4.5% to $167.5B, led by declines in industrial supplies, capital goods, and consumer goods. 1Y trend: "Down, Deficit is growing" (Census)

Crypto

Speaking after the FOMC meeting, Powell stated that banks can engage with crypto if they manage associated risks effectively. He noted a higher threshold for banks in crypto due to its novelty but affirmed the Fed’s openness to financial innovation. Powell dismissed claims of crypto firms facing banking access issues, clarifying the Fed does not aim to cut off legal customers. He emphasized the Fed’s role in scrutinizing banks’ crypto ties and acknowledged the need for a stronger regulatory framework to address industry challenges. (source)

World Markets

The Indian rupee fell beyond 86.6, nearing January's record low of 86.7, as aggressive RBI liquidity injections fueled rate cut expectations. RBI's forex interventions to defend the rupee drained bank reserves, heightening expectations of a rate cut this quarter, with debate over the timing. Slowing economic growth, contrary to earlier optimism, led investors to shift from Indian markets to other Asian assets, increasing pressure for looser policy. 1Y trend: "Up"

Commodities

Gold fell below $2,750 after hitting ATH earlier in the week, as markets reassessed the Fed's policy stance. Safety demand waned as mixed Trump's tariff signals eased concerns. However, dovish moves by other central banks, including rate cuts by the BoC and Riksbank, along with expected ECB easing and signals from the RBI and PBoC, limited gold's decline. 1Y trend: "Up"