On Wednesday, the dollar maintained its position, with traders cautiously awaiting U.S. inflation figures that could sway the Federal Reserve’s policies. Meanwhile, Bitcoin encountered turbulence after a false message on social media led to market disruption.
An unauthorized post on a U.S. securities regulator’s social media account falsely claimed approval for bitcoin exchange traded funds (ETFs). Despite the Securities and Exchange Commission’s swift denial and deletion of the misinformation, Bitcoin initially soared to $47,897, then swiftly dropped below $45,000.
Currently standing at $45,953, Bitcoin faces expectations tied to potential positive ETF decisions by the SEC, which could attract substantial new investments and has already driven up Bitcoin’s value over the past two months.
Chris Weston, head of research at Pepperstone, noted that most observers have already factored in the possibility of SEC approval for ETFs, emphasizing the market’s focus on factors like the commencement of ETF trading, projected Bitcoin holdings by year-end, and the value of inflows during this period.
While the dollar held its ground in the currency market, the dollar index, measuring its strength against six major currencies, stood at 102.53 after a 0.215% gain on Tuesday. After a 2% drop in December, the index has risen by 1% this month as traders reevaluate expectations regarding the Fed’s rate cuts.
In December, the Fed’s unexpectedly dovish stance, projecting 75 basis points of rate cuts in 2024, significantly shifted market predictions. However, current forecasts suggest a scaling back, with markets currently pricing in around 140 basis points of cuts this year, down from the previous anticipation of 160 bps.
Traders are closely eyeing the U.S. consumer price index report due on Thursday, anticipating a 0.2% monthly increase and a 3.2% annual rise in headline inflation. This report is critical in gauging the likelihood of a March rate cut.
Rob Carnell, Asia-Pacific Head of Research at ING in Singapore, highlighted the need to consider inflation alongside economic growth when contemplating rate adjustments, suggesting that solely focusing on inflation might not be sufficient grounds for aggressive rate cuts.
The probability of a Fed easing in March, as indicated by Fed funds futures, dropped from 80% to 64% in a week, according to the CME FedWatch tool. Carnell suggested that a rate cut would require dire labor market conditions, a scenario currently not reflected in the data.
In the realm of currencies, the euro and sterling remained relatively stable against the dollar, while the Japanese yen weakened slightly. The Australian dollar, despite showing slower inflation in November, saw a minor rise to $0.6703, with markets already factoring in expectations of unchanged interest rates.
