The recent 25 bps hike in US Federal Reserve’s interest rates by the Fed Chair Jerome Powell has created waves across markets. The interest rates have now surged to their pinnacle in 22 years, standing between 5.25-5.5%. Underlying this alteration was the US’s economic data, and it dropped a subtle hint at prospective hikes.
Some seasoned market watchers, however, are of the opinion that the cycle of rate hikes might have come to an end. Rajeev Sharma, the managing director of fixed income at Key Private Bank, stated that he anticipates a pause in the rate hike process for the time being.
The Global Chief Economist at Manulife Investment Management, Frances Donald, similarly pointed towards a prolonged ‘hawkish hold’ from the Fed. He conveyed his expectations of a cut, but possibly no sooner than 2024. According to him, Powell might need to keep the speculations of more hikes alive lest the market anticipates cuts early and stokes inflation expectations.
The US inflation remains significantly higher than the Fed’s 2% target, and its labor market is robust. This combination makes the Fed’s decision towards financial easing rather tentative. Meanwhile, the US money markets anticipate strong chances of a cut by the Fed as soon as September, contrary to analysts’ views.
Moving on to the crypto sphere, the crypto prices exhibited volatility but stood mostly higher than their pre-announcement levels. BTC, for instance, experienced around a 1% rise, trading around $29,500. ETH and Solana (SOL) also saw positive movements, the former around 1% and the latter a notable 10% up. Quite critically, BTC is now retesting resistance at its late-June to mid-July lows of $29,500.
This recent development projected a very positive medium-term technical bias for BTC. It remains in a strong uptrend for 2023 and is comfortably above its 200DMA. So, while crypto lingers on its market roller coaster, the looming question is – will the Fed’s current and future decisions send ripples or tidal waves across the financial ecosystem?
Source: Cryptonews
