Bitcoin Surges to $75,500, Ethereum Approaches $2,400, Morgan Stanley: Soaring Oil Prices Don't Shake June and September Rate Cut Forecasts

Bitcoin surged early this morning to $75,500, hitting a recent high, while Ethereum broke through $2,380. Over the past 24 hours, futures liquidation reached $570 million, with short positions accounting for $446 million; this indicates a large-scale short squeeze. Market volatility is intense, and investors should exercise caution.

Morgan Stanley: Rising Oil Prices Do Not Change June and September Rate Cut Expectations

While the market is obsessively debating whether the Federal Reserve can still cut rates this year, Morgan Stanley offers a contrary view. According to Bloomberg, Morgan Stanley Chief U.S. Economist Michael Gapen stated during a March 17 Bloomberg roundtable in New York, “We still expect rate cuts in June and September, though there is a risk of delay.”

This stance sharply contrasts with recent market sentiment. After the Iran conflict erupted and oil prices surged, concerns about inflation resurfaced, prompting traders to significantly reduce their bets on rate cuts by the Fed. Futures tied to the Fed funds rate now only price in a 25 basis point cut in December, whereas last month, markets expected at least a 50 basis point cut this year. Economists at TD Securities and Barclays also recently pushed back their first rate cut forecast from June to September.

Yield Movements and Terminal Rate Revisions, Gapen: Main Risk Is “Delay”

The bond market also signals tension. Last week, U.S. Treasuries experienced a sharp sell-off, with the two-year yield rising to nearly 3.75%, surpassing the Fed’s target rate—an extremely rare occurrence. The indicator measuring market expectations for the terminal rate of this easing cycle has increased by about 50 basis points since late February, breaking above 3.4%.

Gapen expressed surprise: “The move in the two-year yield is quite large; I’m a bit surprised. I can see longer-term yields moving, but I’m again surprised that the terminal rate has been repriced so high.” He also admitted that the Fed might delay its first rate cut until September or even December. If that happens, the next cut could be pushed out to 2027: “The main risk we see is a delay, and the longer the Fed waits, the more likely it is to need an additional cut.”

Market Outlook: 60% Chance of Rate Cut in September, Bullish Sentiment Temporarily Overcomes Safe-Haven Mood

Currently, the futures market prices in a 60% probability of a 25 basis point rate cut in September, indicating that while optimism for rate cuts has waned, the possibility of easing later this year has not been entirely dismissed. In the crypto space, Bitcoin’s rapid rise appears to have temporarily overshadowed the safe-haven sentiment driven by rising oil prices. However, after a large-scale short squeeze, if there is no sustained buying, the market could pull back. Investors should remain alert to volatility risks.