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The dollar experienced cautious trading on Wednesday, with investors eagerly awaiting the release of crucial U.S. inflation data later in the week. Meanwhile, Bitcoin showcased heightened volatility following a deceptive social media post on the U.S. Securities and Exchange Commission’s (SEC) account.
Highlights:
- The SEC reported an unauthorized access to its social media account, leading to a false message claiming approval of Bitcoin ETFs. This misinformation caused a 1.3% drop in Bitcoin’s value, impacting its recent surge driven by hopes for SEC approval.
- The anticipation of a positive SEC decision on Bitcoin ETFs has been a key factor in recent market dynamics, attracting interest from the crypto industry and influencing Bitcoin’s value.
- The dollar index edged lower to 102.41 after gaining 0.215% on Tuesday. Traders are reassessing expectations for the Federal Reserve‘s rate cuts in 2024, with a 1% gain in the dollar index this month following a 2% drop in December.
- Traders are eagerly awaiting the U.S. Consumer Price Index (CPI) report, expecting a 0.2% rise in headline inflation for the month and a 3.2% increase on an annual basis. The outcome will be crucial in shaping future market dynamics, with considerations for potential rate cuts.
Read more: Inflation Data Awaited: Gold Reacts to Market and Dollar
Bitcoin’s Rollercoaster Ride
The SEC reported a brief unauthorized access to its X social media account, where a false message claimed approval of exchange-traded funds (ETFs) for Bitcoin. This news, eagerly anticipated by the crypto industry, prompted a 1.3% drop in Bitcoin’s value to $45,516, after reaching a 21-month peak of $47,897 fueled by the fake announcement.
The anticipation surrounding a positive SEC decision on ETFs has been a driving force behind Bitcoin’s recent surge, as the cryptocurrency market hopes to attract billions in new investments.
Market Sentiment and Dollar Index Movement: Awaiting U.S. Inflation Data Insights
Chris Weston, head of research at Pepperstone, noted, “The reality is most who have followed the saga have moved on, and the green light from the SEC is fully priced.” Meanwhile, the dollar index, measuring the U.S. currency against six rivals, edged 0.09% lower to 102.41, following a 0.215% gain on Tuesday.
The dollar index has gained 1% this month, rebounding from a 2% drop in December as traders reassess expectations for the Federal Reserve’s rate cuts in 2024. The unexpected projection of 75 basis points (bps) of rate cuts in December stirred market expectations, with traders initially anticipating up to 160 bps of cuts, now settled at 140 bps for the year.
Focus on U.S. Consumer Price Index (CPI) Report
Traders eagerly await the U.S. consumer price index report scheduled for Thursday, expecting a 0.2% rise in headline inflation for the month and a 3.2% increase on an annual basis. The outcome will be a pivotal factor in shaping future market dynamics.
Rob Carnell, Asia-Pacific Head of Research at ING, emphasized that while inflation easing is necessary, it is not sufficient for aggressive rate cutting. He added that an imminent rate cut would require specific economic indicators, such as falling payrolls and a substantially higher unemployment rate, neither of which is currently evident.
Market Outlook and Currency Movements
The euro rose 0.16% to $1.0949, while the yen weakened 0.34% to 144.96 per dollar, approaching the 145 mark. Other currencies, such as the Norwegian crown, saw a 0.3% rise against the euro, influenced by data indicating a larger-than-expected fall in Norway’s core inflation rate in December. This development could accelerate the central bank’s planned policy easing.
In Sweden, the retail sales decline of 0.5% in November led to little change in the Swedish crown against the euro at 11.1986. Morgan Stanley recommended long positions on NOK/SEK, highlighting the Norges Bank’s reduction in Norwegian crown sales and the impending conclusion of the Riksbank’s FX-hedging program as influential factors.
Read more: Bitcoin Could Hit $200k by 2025 with Spot Bitcoin ETFs
As traders await the crucial U.S. inflation data, the market remains on edge. The recent SEC Bitcoin ETF scare added an element of unpredictability to the cryptocurrency landscape. Dollar movements, influenced by evolving expectations regarding Federal Reserve rate cuts, continue to shape global currency dynamics. The upcoming U.S. CPI report will likely play a pivotal role in determining the market’s trajectory in the near term. Investors remain vigilant, ready to adapt their strategies based on the unfolding economic landscape.
