Global Liquidity Updates
China's Stimulus Push Leads the Way, But More Easing Needed Globally
Lots of news circulating regarding China’s recent monetary and fiscal policies.
While this indicates a potential turning point, China🇨🇳 still requires significantly more stimulus to fully revive its economy. Lending and credit growth exceeded expectations once again, with projections suggesting fiscal stimulus could reach up to 6 trillion yuan by year-end.
In the coming weeks, additional policy measures from the East are expected, and USDCNY will be a useful gauge for tracking these moves
Though China is leading the charge, we are still awaiting similar action from the West and other major central banks.
Our outlook remains bullish as we head into year-end. China is pushing for more easing, while slow-moving economies and central banks look poised to follow suit-a bullish combination that doesn’t occur often.
From a data standpoint, our liquidity index has seen a $2.922T decline (a -2.2% change) due to increased bond market volatility. The RoC metric, however, remains long.
Disclaimer: RRP has not been updated today, likely due to the Columbus Day holiday in the US.
Temporary Volatility or Start of a Trend Shift?
AE Global Liquidity Oscillator manifesting its first negative sign this week.
In the last 4 weeks, this was the first-ever instance of a negative value that we observed. The recent movements in the MOVE index, which tracks bond market volatility, played a role in this shift.
Also, Bitcoin has been the one to track this negative signal. In spite of this, the 3M RoC of GL has managed to keep a positive score, indicating that one part of the liquidity process is still displaying strength.
While the recent dip signals caution in the short term, the sustained positive RoC indicates that underlying liquidity strength could support a rebound. We see this is just short-term volatility, and the broader outlook remains bullish. Keeping a very close eye on this regardless.
Global Liquidity Declines Amid Bond Volatility, but Q4 Outlook Remains Bullish for Bitcoin
Our Global Liquidity Index decreased by 2.02% since last week, and is currently standing at $130.07 trillion. The RoC signal though, remains positive.
We've seen increased volatility in the bond market last week (largely driven by concerns over conflicts in the Middle East), which was a key factor for the recent liquidity decline.
Meanwhile, the latest data from the Federal Reserve's bank credit report points to relatively weak flows. However, behind the scenes, there's a noteworthy addition of liquidity coming from commercial banks.
Looking ahead, we anticipate a significant increase in liquidity from the West in the coming months.
Combined with our Liquidity Seasonality chart, it's hard not to remain bullish on Bitcoin and other risk-on assets as we move further into the Q4.
