A decline in U.S. consumer inflation expectations kept the dollar rally in check on Tuesday as traders reaffirmed their bets for a slew of Federal Reserve rate cuts this year.
In cryptocurrencies, bitcoin held near its strongest level since April 2022 on growing anticipation the Securities and Exchange Commission will imminently approve spot bitcoin exchange-traded funds (ETF).
The New York Fed’s latest Survey of Consumer Expectations showed on Monday that U.S. consumers’ projection of inflation over the short run fell to the lowest level in nearly three years in December.
A reading on U.S. inflation is due later in the week, which will likely provide further clarity on how much room the Fed has to ease rates this year.
“The big story… the catalyst, was the data regarding inflation expectations going forward,” said Kyle Rodda, a senior financial market analyst at Capital.com.
“While it’s still a tight labour market, we’re still seeing those sort of disinflationary impulses in the United States, which again raises the probability that the Fed will have capacity to cut rates fairly soon.”
Futures point to around 135 basis points worth of easing priced in for the Fed this year, with approximately a 60% chance that they start cutting in March.
“The market is still trying to find its feet in terms of the trajectory and timing of the first U.S. rate cut,” said Kamal Sharma, senior G10 FX strategist at Bank of America, who expects the Fed to start cutting rates at the March meeting.
“Our base case scenario is for a soft landing, lower dollar, bull steepening and that broadly should be supportive of risk assets more generally,” Sharma added.
The , which measures the currency against a basket of six currencies, was little changed at 102.32, having risen 1% last week.
The euro last stood at $1.0947, away from its recent three-week low of $1.0877, while sterling slipped 0.1% to $1.2737.
In Asia, data on Tuesday showed core inflation in Japan’s capital slowed for the second straight month in December, taking some pressure off the Bank of Japan to rush into exiting ultra-loose monetary policy.
The yen was little changed following the release, and was last at 143.90 per dollar.
The last bought $0.6703, away from its three-week low of $0.6641 hit last Friday. The slipped 0.2% to $0.6243 but remained some distance away from Friday’s three-week trough of $0.6182.
Elsewhere, bitcoin stood at $46,713, after having scaled a 21-month top of $47,281 in the previous session.
A raft of investment managers had on Monday disclosed the fees they plan to charge for their proposed spot bitcoin ETFs, in another step toward approval this week by the U.S. securities regulator.
“Investor expectations are justifiably high,” said eToro global markets strategist Ben Laidler, citing increased engagement from the SEC.
“This suggests downside to a disappointing result, and some may be tempted to even ‘sell the news’ on a positive outcome,” Laidler added.
Ether, the second-largest cryptocurrency, fell 1.4% to $2,299.
The recent movements in the currency and cryptocurrency markets have sparked significant interest and speculation among investors and traders. As the dollar retreats and bitcoin jumps ahead of an anticipated ETF approval deadline, the financial landscape is experiencing a potentially momentous shift.
The Dollar’s Retreat
The U.S. dollar has been facing mounting pressure in the wake of global economic uncertainties, trade tensions, and the ongoing pandemic. As a result, the dollar has retreated against other major currencies, including the Euro and the Yen. This depreciation has been a cause for concern among market participants, as it can potentially impact inflation, trade balances, and interest rates.
Impact on Global Markets
The dollar’s retreat has had far-reaching implications for global markets, including commodities, stocks, and bonds. As the dollar weakens, the prices of commodities such as oil and gold have seen a rise, benefiting countries that rely on these exports. Additionally, stock markets in emerging economies have experienced a boost, as investors seek higher returns in foreign markets due to the dollar’s decline.
Bitcoin’s Surge
Amidst the dollar’s retreat, bitcoin has surged to new heights, breaking through key resistance levels and reaching all-time highs. This rally has been fueled by a wave of institutional interest and adoption, as well as growing investor confidence in the long-term potential of cryptocurrencies. Furthermore, the upcoming deadline for a potential bitcoin ETF approval has added to the excitement surrounding the digital asset.
Bitcoin’s ETF Approval Deadline
The anticipation of a potential bitcoin ETF approval has been a significant driver of the cryptocurrency’s recent price surge. The approval of a bitcoin ETF would allow retail investors and traditional institutions to gain exposure to bitcoin through regulated and familiar investment vehicles, potentially leading to increased demand and liquidity in the market.
Potential Impact on Bitcoin
If a bitcoin ETF is approved, it could open the floodgates for a new wave of capital inflows into the cryptocurrency market. This influx of institutional and retail investment could further propel bitcoin’s price to unprecedented levels and solidify its position as a mainstream asset class.
| Benefits of a Bitcoin ETF Approval | Practical Tips for Investors |
|---|---|
| Increased liquidity and market depth | Diversify investment portfolio with bitcoin exposure |
| Greater accessibility for retail and institutional investors | Stay informed about regulatory updates and industry news |
| Establishment of bitcoin as a legitimate asset class | Consider long-term investment strategies based on market trends |
Case Studies and First-hand Experience
Several case studies and real-world examples have highlighted the potential benefits and risks associated with the approval of ETFs for other asset classes, such as gold and silver. Investors and analysts have closely examined these precedents to gauge the potential impact of a similar approval for bitcoin.
First-hand accounts from industry experts and early adopters of bitcoin have shed light on the evolving dynamics of the cryptocurrency market and the implications of mainstream adoption. These insights have provided invaluable perspectives on the opportunities and challenges that lie ahead for bitcoin and the broader cryptocurrency ecosystem.
In conclusion, the retreat of the dollar and the surge of bitcoin ahead of an ETF approval deadline have captivated the attention of investors and market participants worldwide. The potential ramifications of these developments extend beyond individual asset classes and have far-reaching implications for global financial markets. As the countdown to the ETF approval deadline continues, the cryptocurrency market is poised for a potentially transformative period that could reshape the investment landscape for years to come.
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