🌳 Fed Signals Rate Cut as Inflation Eases; Tether Reports Record-Breaking Profit in First Half of 2024

Macro & TradFi

Federal Reserve Chair Jerome Powell indicated that the central bank is poised to cut interest rates as early as September (https://www.bloomberg.com/news/articles/2024-07-31/fed-on-course-for-september-rate-cut-as-risks-to-job-market-grow?srnd=homepage-asia), provided inflation continues to ease, and the labor market does not deteriorate further. While Powell emphasized the Fed’s confidence in dialing back on economic restraints, he cautioned that a rate cut is contingent on favorable economic data, particularly inflation. The Fed’s shift in focus reflects growing concern over the labor market, marking a departure from its previous priority on curbing inflation. This approach aims to prevent further job market weakening while continuing to manage inflation risks. Markets have already priced in a quarter-point rate cut for September, though Powell stressed that future decisions will remain flexible based on evolving economic conditions.

In other news, Japan confirmed a $36.8 billion currency intervention in July (https://www.cnbc.com/2024/07/31/japan-confirms-36point8-billion-yen-intervention-as-boj-hikes-rates.html) to stabilize the yen, which had fallen to a 38-year low against the U.S. dollar. This significant intervention followed repeated warnings from Japanese authorities about potential actions to counter volatile currency movements. In response to the yen's weakness, the Bank of Japan (BOJ) also raised its benchmark interest rate to around 0.25%, marking its highest since 2008. This dual approach—currency intervention and interest rate hikes—signals Japan's commitment to stabilizing its currency and managing economic pressures as the yen struggles under prolonged depreciation.

On Wednesday, the S&P 500 and Nasdaq posted their largest daily gains since February, driven by a surge in chip stocks and signals from the Federal Reserve suggesting potential rate cuts in September if inflation cools. The Fed maintained its interest rate range at 5.25%-5.50% but hinted at future easing, contributing to a 9.8 basis point drop in the U.S. 10-year Treasury yield. The S&P 500 rose 1.58%, the Nasdaq jumped 2.64%, and the Dow added 0.24%. Nvidia surged nearly 13% following a strong AI chip sales forecast by AMD, pushing the semiconductor index up nearly 7%. Meanwhile, Microsoft dipped 1% after reporting high AI-related expenses, while Meta gained 5% post-market on better-than-expected earnings. Investors are now focused on upcoming tech earnings, with Apple and Amazing earnings due tomorrow at 05:00 SGT and 05:30 SGT, respectively.

DeFi & CeFi

   •   Tether reports net profit of $5.2B in H1 2024

   •   Telegram launches in-app browser and mini-app store in the new update

   •   Libra creator David Marcus endorses Trump

   •   Elixir launches synthetic dollar to challenge Ethena's USDe

   •   Ondo’s USDY launches on Aptos

Tether (https://blockworks.co/news/tether-q2-2024-earnings-report) has announced a significant net profit of $5.2 billion for the first half of 2024, with a reported operating profit of $1.3 billion in Q2 alone, following a record $4.52 billion in Q1. As of June 30, 2024, Tether's net equity has increased to $11.9 billion, up from $7.01 billion at the end of 2023. The company attributes its revenue to investments made with fiat currencies received from issuing its USDT stablecoin, notably reaching a record $97.6 billion in U.S. Treasuries in Q2. Tether claims its reserves total approximately $118.4 billion, exceeding its issued USDT of $113 billion, thus confirming that USDT is fully backed and over-collateralized by about $5.3 billion. In Q2, Tether issued over $8.3 billion in USDT, while its main competitors, USDC and DAI, experienced declines in issuance during the same period.