Stablecoins Aren't a Long-Term Store of Value — Market Talk

1040 ET - Stablecoins could prove effective in international transactions but they aren't a long-term store of value, TP ICAP's director of digital assets Hina Joshi says. "Stablecoins solve a lot of the problems that we see in international payments such as high fees, low settlement times and lack of transparency," she says. However, the cryptocurrencies are tied to government-issued currencies, which lose value over time due to inflation. That means stablecoins will gradually lose purchasing power in the long run, she says. (renae.dyer@wsj.com)

1035 ET - Fed officials use the personal-consumption expenditures price index to track inflation, and they look to the core version, which excludes food and energy prices, to get a sense of the underlying trend. Using data from the fresh June CPI report, economists are estimating that core PCE inflation likely held steady around 2.7% or perhaps ticked up to 2.8% in June. That will mean another month of the underlying trend making no progress toward the 2% target. Core PCE inflation hit a recent low of 2.6% in April, but ticked higher again in May. Now it looks like, at best, it stayed put in June. Economists will refine their estimates of PCE inflation after getting wholesale-price data Wednesday. (matt.grossman@wsj.com; @mattgrossman)

1033 ET - While downside risks to economic growth in Canada persist, recent data fits Royal Bank of Canada's base-case view that the Bank of Canada won't cut interest rates again this cycle, economist Abbey Xu says. The central bank has already opted to skip cuts at its last two meetings. Xu says it remains too early to determine whether recent increases in auto and grocery prices are fully attributable to tariffs. The bulk of upward pressure on prices in recent months has come from domestically produced services, excluding shelter, that are more reflective of domestic consumer demand trends than external factors, the economist adds. (robb.stewart@wsj.com; @RobbMStewart)

1030 ET - Canadian inflation is still too hot, so rate cuts will have to wait, says Manulife Investment Management's Dominique Lapointe. He says that while the Bank of Canada could reasonably look through the temporary price increases caused by counter-tariffs, it has been reluctant to do so given uncertainty around the full extent of the pass-through and the possibility of other inflationary forces at play. At the same time, Canada has yet to experience recessionary pressures that would compel the BoC to shift toward a more accommodative stance, Lapointe says. Still, Manulife reckons a continued rise in the unemployment rate, widening output gap, and greater clarity on the temporary inflationary impact of tariffs will eventually allow the central bank to implement two additional rate cuts in this cycle. (robb.stewart@wsj.com; @RobbMStewart)

1008 ET - Canada's inflation data rules out a rate cut from the Bank of Canada on July 30. Yet, further easing in the fall can't be ruled out, says TD Bank economist Andrew Hencic, as the economic backdrop in Canada at this stage remains weak. President Trump's renewed trade threats last week, outlined in a letter to PM Mark Carney, add to the uncertainty that has hovered over the economy this year, he says. Also crucial, he says, is whether additional data indicate that June's solid employment gain is the start of a trend or a one-off aberration; and whether officials in Washington and Ottawa agree on a new pact before Trump's Aug. 1 deadline to resolve the current tariff row between the two countries. (paul.vieira@wsj.com; @paulvieira)

1005 ET - Institutional investors are showing heightened sensitivity to counterparty risks in cryptocurrencies that could cause a sharp drop in prices, TP ICAP's digital assets director Hina Joshi says. This follows the collapse of the crypto exchange FTX in 2022 and crypto lender Genesis Global in early 2023, which led to sharp losses in bitcoin and other cryptocurrencies. Investors are seeking "clear asset protection mechanisms" to reduce their exposure to the potential losses stemming from such events, she says. (renae.dyer@wsj.com)

1003 ET - The Canadian Chamber of Commerce expects the central bank will again hold its fire on interest rates later this month after price pressures edged higher and goods inflation picked up again in June, economist Andrew DiCapua says. He says the acceleration in inflation last month was mostly brought on by base effects from gasoline prices, but underlying inflation remains stubborn. This will weigh heavily on the Bank of Canada, especially as retaliatory tariffs begin to feed through and businesses warn of rising consumer prices, he adds. (robb.stewart@wsj.com; @RobbMStewart)

1000 ET - There were signs of upward pressure on Canadian consumer prices from tariffs last month, though the impact appears marginal so far, says Oxford Economics' Michael Davenport. He notes Statistics Canada attributed a jump in year-over-year clothing price inflation in June to "trade uncertainty" amid higher costs from tariffs, while upward pressure on durable goods prices likely also reflects tariff-related factors. Still, food price inflation slowed in June despite ongoing Canadian counter tariffs on U.S. food product. Davenport says with trade uncertainty high and core price pressures likely too firm, he expects the Bank of Canada to hold its policy rate steady this month. (robb.stewart@wsj.com; @RobbMStewart)

0941 ET - Retaliatory tariffs on US imports partly explains why Canada core inflation remains stubbornly high amid below-potential growth, BMO Capital Markets' chief economist Doug Porter says. The Bank of Canada's preferred measures of core CPI in June remained stuck at 3%, or the upper end of the central bank's inflation-targeting range. June's CPI data "gives the BOC no opening to cut rates" on July 30, he says. Shelter costs are applying upward pressure on core inflation, Porter says, but so are retaliatory tariffs on US imports. For instance, prices for durable goods accelerated 2.7% in June, from 2% level in May; vehicles jumped 4.1%; furniture climbed 3.3%; and clothing and footwear increased 2%. Porter says clothing is generally a source of disinflation during weak economic times. (Paul.Vieira@wsj.com; @paulvieira)

0931 ET - Canada's June inflation report indicates that cost pressures persist in the economy, likely driven by Canadian-dollar weakness and the impact of retaliatory tariffs on US imports, says analyst Thomas Ryan at Capital Economics. He notes that the 3-month annualized rate of core CPI reached 3.5% in June, or a six-month high. "As a result, the door is now firmly slammed shut on a July rate cut from the Bank of Canada," Ryan tells clients. Headline inflation also rose, to 1.9%, or below the BOC's 2% target. Ryan notes that headline CPI is below 2% due to the cancellation of a consumer carbon tax by PM Mark Carney. A gauge of CPI excluding energy rose 2.7% in June. (Paul.Vieira@wsj.com; @paulvieira)

0926 ET - The latest inflation data do little to reduce tariff uncertainty and will likely keep the Fed waiting, AllianceBernstein's Eric Winograd writes. A small decline in the index for shelter prices indicates that "the underlying trend toward lower inflation remains intact," he says. But some items likely to be affected by levies on imports saw faster price increases. "Indeed, were it not for tariff-related uncertainty, I think the FOMC would have sufficient confidence in that path that they would already be lowering rates," Winograd says. Until there is more clarity "the current policy stasis is likely to persist," he says.(paulo.trevisani@wsj.com; @ptrevisani)

0924 ET - Omair Sharif and his research firm, Inflation Insights, see tariffs' fingerprints in the June inflation data. "Today's report showed that tariffs are beginning to bite," he writes. He notes that excluding cars, which got cheaper, core goods increased by 0.55% last month, the biggest monthly jump since November 2021. In June, slower price growth in the services categories helped restrain overall inflation. That may not continue, though: "I would not count on weaker core services going forward to restrain the expected rise in core goods," Sharif writes. (matt.grossman@wsj.com; @mattgrossman)