There’s been a strong move higher in cryptocurrencies in recent trade with Bitcoin surging to its highest level in 10-months after more than doubling in value since March. As is often the case with such an opaque market it is hard to definitively state what has caused this rally, but the recent escalation in US-China trade tensions seem about as plausible reason as any. Cryptocurrencies are often cited as a safe-haven asset - usually by those who try to justify reasons to invest given their poor efficacy as a transactional currency - and even though the longer-term correlations with equities are inconsistent at best, there has clearly been a flurry of buying as stock markets have tumbled in recent sessions.

Rather than investors seeking out inherently risky assets as safe havens, a more likely explanation is the recent drop in the Chinese Yuan and the expectation of a further depreciation when Beijing seek to make exports more attractive in response to the latest round of US tariffs. While this may not seem a major catalyst by itself, it is worth remembering how small crypto markets are compared to traditional asset classes with the total market cap in the space even after the recent surge still below $250B. Furthermore, the free float of many cryptocurrencies is far smaller still and this means that relatively small amounts of buying can cause outsized moves in the markets. While there is little by the way of solid fundamentals to support this move, if past experience has taught us anything it is that these rallies can really shift when they get going and there could well be more gains around the corner.

UK labour market improves but wages miss

The latest employment figures from the UK have been mildly positive on the whole with the unemployment rate falling to 3.8% in the 3 months to March - its lowest level since 1974. One blot on the report was a drop in average weekly earnings 3m/y to +3.2% vs 3.4% expected, but a core reading which strips out the volatile bonus component came in in line with forecasts. In terms of market reaction there’s been little reaction in the pound, with the currency remaining below the $1.30 handle and not far from a 2-week low.

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