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The global interest rate cut cycle has begun, which is good for high-risk investments

Economists at the Bank of America said in a report that the Federal Reserve is likely to keep interest rates unchanged next week, while predicting two rate cuts this year starting in September. 10x Research said in its latest article that the U.S. economy is slowing down, which is a good thing for now. GDP is just above 1%, the ISM manufacturing index has been in contraction for several consecutive months, and the employment situation continues to be weak, which has a negative impact on consumer spending. In addition, another key and forward-looking employment indicator, "job vacancies", has slowed significantly, all of which will lead to lower inflation.

At the same time, the European Central Bank announced its June interest rate decision. As expected, it cut interest rates by 25 basis points. This was the first time since 2019, making it the second central bank among the G7 member countries to cut interest rates. Last night, the Bank of Canada fired the first shot in the G7 rate cut.

Specifically, the euro zone deposit facility rate was 3.75%, up from 4% in the previous period, the first downward revision since September 2019; the euro zone main refinancing rate was 4.25%, up from 4.5% in the previous period; the euro zone marginal loan rate was 4.5%, up from 4.75% in the previous period, all of which were the first downward revisions since March 2016.

Previously, Nomura Securities pointed out in its latest report that the global interest rate cut cycle is already underway, with more than a dozen major central banks cutting interest rates. It is expected that from now until the end of June, the Swiss National Bank, the National Bank of Poland and others will cut interest rates. Against the backdrop of the global interest rate cut cycle, it will be a long time before the US cuts interest rates.

However, although the Fed is still waiting, there are some signs that interest rate cuts are about to begin. Previously, the Fed and two other federal regulatory agencies are working on a new plan that will relax the capital increase requirements for large banks in the previous proposal. The previous plan required large US banks to increase their capital by nearly 20%, and the new plan may be only about half of the original plan. This shows that the Fed has allowed banks to increase their loan ratios and alleviate the profit crisis, which is seen as one of the important signals for a rate cut.

If the CPI increases by 3.3% or less year-on-year, a closing price triggered by a decline in US employment or inflation will undoubtedly set a new record high between this Friday and next Wednesday. Therefore, 10x Research expects Bitcoin to reach more than $73,500 by the end of next week.

Although the world is still in a high-interest environment, the cryptocurrency market has risen by 38% so far, indicating that it may not be all doom and gloom. Binance Research released a new analysis report stating that if the Fed postpones interest rate cuts because economic growth is still strong, and inflation just takes some time to fall back to 2%, then the overall background is still favorable for growth assets such as cryptocurrencies.


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