Major Events to Watch in the Market This Week
On Friday, Ethereum surged to a record high above $1,700. The second-largest cryptocurrency by market cap surged 25 percent this past week. On February 8, CME group is launching its first Ethereum futures contracts.
Crypto fund manager Grayscale also reopened its Grayscale Ethereum Trust. The fund closed in December for "administrative purposes." The trust saw 100,000 Ethereum coins flow into the fund this past week with total Ethereum under management around $5 billion. JPMorgan believes that Ethereum futures will take some time before gaining significant interaction from investors.
"The listing of CME bitcoin futures coincided with all-time highs in bitcoin prices, and researchers at the San Francisco Fed suggested that, by providing a market where bearish positions could be more readily expressed, the listing of these futures contributed to the reversal of bitcoin price dynamics," JPMorgan analysts led by Nikolaos Panigirtzoglou said last week.
"In a similar vein, it may be that this week's listing of ethereum futures contracts will be followed by negative price dynamics by enabling some holders of physical ethereum to hedge their exposures," they said.
Oil prices hit their highest mark in the past year late last week as Brent crude futures traded close to $60 a barrel. Oil investors cheered the vaccine campaign that started in late 2020 in the hopes that travel demand and economic reopenings will follow after.
This week, keep an eye on major forecaster reports assessing the demand in oil and its projected growth. OPEC, the International Energy Agency, and the US Energy Information Administration are set to release their monthly reports.
The US and China are set to release inflation reports this week. Forecasts predict that inflation rose by 1.5 percent in January. The bond market has signaled that consumers expect prices to continue rising in goods. Analysts turn to US five-year Treasury Inflation-Protected Securities (TIPS) to assess inflation.
"The most recent move higher for 5-year inflation expectations (2.18%, the highest since 2013) is therefore significant," DataTrek analyst Nicholas Colas said. "Importantly, TIPS are NOT saying rampant inflation is just around the bend. The 2.2% forecast embedded in those bond prices is simply a validation of the idea that the US will see a reasonable and lasting economic recovery in the years ahead," he added.
"While the chatter around the inflation outlook is elevated now, we would expect it to become even more intense as we approach mid-year if our CPI forecasts are right," strategists Ralph Axel and Olivia Lima at Bank of America wrote last week. They forecast a consumer price inflation (CPI) rate of 3.4% by May, which might prompt investors to revise their view on when the Federal Reserve may begin to tighten monetary policy - but they add a caveat.
"History shows that markets tend to overreact to positive developments and price in hikes long before the Fed actually delivers," they said.