Recent comments from Fed Chair Jerome Powell caused the dollar to slightly decline, while cryptos experienced an uptick due to speculation that former President Donald Trump’s assassination attempt increased his chances of reelection. Trump, known for his procrypto stance, has yet to outline specific policies for the cryptocurrency sector.
Following the incident, betting odds for Trump’s victory improved. PredictIt, an online betting platform, showed Trump’s election odds climbing to 67 cents from 60 cents on last week, while Biden’s odds were at 27 cents. The dollar often strengthens with “Trump trade,” which includes assets expected to do well under Trump’s administration, characterized by aggressive trade policies and relaxed regulations for specific industries.
However, this initial boost was short lived, and the dollar retreated from its earlier levels.
The greenback also dropped sharply when Powell started his speech. He pointed out that there was some indication from three inflation reports from the second quarter that the rate of price increases was stabilizing toward the fed’s objective, indicating the possibility of a rate cut in the near future.
According to Bannockburn Global Forex’s head market analyst, Marc Chandler, Powell’s speech did not quite reaffirm the market’s already-held optimism about a September rate decrease.
After peaking at 104.31, the dollar index, which compares the value of the U.S. dollar to a basket of other currencies, fell 0.07% to 104.22, while the euro fell 0.09% to $1.0897. The British pound dropped to $1.2964, down 0.22%.
According to the CME’s FedWatch Tool, markets are fully expecting the fed to drop interest rates by at least 25 basis points in September after recent data showed that consumer prices fell in June for the first time in four years.
Cryptocurrency prices surged, with Bitcoin rising more than 6% to $63,808 after hitting a three-week high of $63,838.86. Ether also increased by more than 7%, to $3,417. The dollar remained steady against the Japanese yen at 157.89, having fallen to 157.15 during Powell’s speech, its lowest level since June, before quickly recovering.
The Bank of Japan (BoJ) is believed to have interfered in the market last week to prop up the value of the Japanese yen in response to the U.S. inflation data, which was lower than anticipated. Authorities may have spent as much as $22.4 billion (3.57 trillion yen) on Thursday for this reason, according to the central bank’s data.
According to FX trader, Helen Given, the yen is likely to appreciate against any indication that the fed may lower interest rates more or sooner than expected.
Crypto companies such as Marathon Digital Holdings Inc. (NASDAQ: MARA) and other industry players are likely to watch how any fed action on interest rates impacts the crypto market over the coming months.
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