The US Federal Reserve officials reverse their initial rate reductions after the latest US jobs report demonstrated the US economy's resilience. It has brought about a shift in perspectives regarding rate cuts, raising questions about the near-term future of the cryptocurrency market, particularly Bitcoin.
Austan Goolsbee and Michelle Bowman, members of the Federal Open Market Committee (FOMC), are now less inclined to lower interest rates in the first half of 2024.
Strong Jobs Report: The Catalyst for Withdrawal
The US non-farm payrolls rose by a staggering 353K, which is the most significant increase in over a year. It has surpassed the market expectations and estimation of 180K. This data point is an indication of the economy's resilience and lowered odds for immediate interest rate reductions from the Federal Reserve.
The 3.7% unemployment rate remained unchanged. The jobs report made it evident that the Fed has greater leeway to postpone rate decreases after June. The Fed has also maintained interest rates at current levels for four straight meetings.
Austan Goolsbee, Federal Reserve Bank of Chicago President, stated he needed more evidence that the Fed is on pace to meet its 2% inflation target before lowering interest rates. As suggested by Fed Chair Jerome Powell during the FOMC news conference, he ruled out interest rate reductions in March. Federal Reserve Governor Michelle Bowman also echoed Goolsbee's views, urging caution before making any decisions about rate cuts. She also stated that it is premature for Fed policymakers to think about lowering rates.
“We do expect the Fed to lower interest rates this year,” Truist managing director Chip Hughey says. “I just think they’re going to be very cautious and move very slowly.” pic.twitter.com/zhNGDmTYmw
— Yahoo Finance (@YahooFinance) February 2, 2024
Economic Data Indicates US Economy's Resilience
The latest retail sales data and other economic indicators support the narrative of a robust US economy. This resilience adds to the argument for the Fed to postpone rate cuts.
According to BlackRock's projections, it is likely that the Federal Reserve will commence rate decreases in June, possibly even before the ECB makes its move. However, the recent jobs report and cautious statements from Federal Reserve officials could delay this timeline.
Potential Delay in BTC's Price Rally
As investors closely monitor the Fed's intentions regarding rate cuts, the crypto market, particularly Bitcoin, faces macroeconomic pressure. The rise in US 10-year Treasury yields above 4% and a strengthening US dollar index at seven-week highs put downward pressure on Bitcoin prices.
The macro-environment could hinder the price rally of Bitcoin following its halving event, as strong economic data and expectations of delayed rate cuts weigh on investors' decisions.
Despite these pressures, Bitcoin maintains a steady price above the $43,000 mark, with 24-hour low and high at $42,584 and $43,422 respectively.
Rate Cuts Affect Bitcoin's Market Dynamics
Macroeconomic news and banking crisis talks may shape Bitcoin's future price trends. Traders are advised to stay informed and adjust their strategies accordingly.
The most recent US economic reports, among them the retail sales numbers, suggest that the economy is rebounding quite vigorously. Amidst the uncertainty surrounding the conclusion of BTFP bailouts in March, investors are scrutinizing the actions of the Federal Reserve and Treasury Department to prevent a banking crisis. It is all while Bitcoin faces increasing pressure from broader macroeconomic factors.
The Bitcoin market has seen an uptick of 3%, resulting in a sustained price above $43,000. During the course of the past day, the minimum amount stood at $42,584, contrasting with a maximum of $43,422. Over the past day, the volume of trades declined by approximately 20%.