Global Liquidity Rises Amid Political Shifts and Economic Uncertainty

Trump was inaugurated today as the 47th President of the United States, marking his second, non-consecutive term.

In his speech, he hinted at potential tariff plans targeting certain countries, though details remain vague.

Combined with lower-than-expected inflation measures, this could drive the DXY into a relief rally to the downside, paving the way for other central banks to pursue further easing measures.

However, concerns remain over the new administration's policies, including the looming debt ceiling expected on January 21st and spikes in US repo rates - clear warning signs the Fed cannot afford to ignore.

Additionally, the Treasury's "extraordinary measures" and potential TGA drawdowns to address the debt ceiling could lead to significant liquidity injections in the coming weeks.

In China, the PBoC conducted its second-largest reverse repo injection, totaling a net of 958.4 billion RMB, to ease pre-Lunar New Year liquidity pressures.

President Xi Jinping indicated plans for further macroeconomic policies in 2025, though without downward pressure on the DXY from the US, it's unlikely China will take the first step.

That said, Q1 of 2025 is shaping up to be very positive.

Our Global Liquidity Index has started to pick up, showing a strong correlation with Bitcoin, as seen in the model we shared last week.

This week, our GLI rose by $2.745 trillion, representing a 2.20% increase.

While liquidity momentum remains weak, with the 3-month RoC still lagging behind the 12-month RoC, early signs are promising.

‍