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Global Markets, Bitcoin Defy Expectations After Fed’s Hawkish Taper Plan Announcement

16/12/2021 by Idelto Editor

Global Markets, Bitcoin Defy Expectations After Fed's Hawkish Taper Plan Announcement

Global markets have defied predictions as the U.S. Federal Reserve and several central banks worldwide are prepping to slow down monetary easing policy. On Wednesday, the U.S. central bank’s Federal Open Market Committee (FOMC) said it plans to taper quantitative easing (large monthly asset purchases) and end the program by March 2022. Moreover, the FOMC members decided to keep interest rates at zero but expect at least three rate hikes next year.

Federal Reserve Outlines Asset Purchase Tapering Plan and Rate Hikes for 2022

Since the onset of Covid-19 in the United States, the U.S. Federal Reserve initiated a monetary easing policy like no other in history. The move has led to a surge in inflation and analysts and economists worldwide have criticized the Fed’s decisions in recent times. The FOMC concluded a two-day meeting on Wednesday and the central bank explained that it plans to shrink its bond purchase program to $30 billion per month by January. This month the Fed will leverage $90 billion in quantitative easing (QE) purchases as opposed to last month’s $120 billion.

In addition to the tapering of QE, the FOMC members also detailed that the central bank has plans for three rate hikes next year. It expects three in 2022, two more rate hikes in 2023, and another two interest rate increases in 2024. The Fed did not, however, blame the rising inflation in the U.S. on its QE but instead noted that the inflation was caused by issues with supply and demand.

“Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation,” the FOMC said on Wednesday. Furthermore, the FOMC statements said Covid-19, and new coronavirus variants, have affected the U.S. economy a great deal.

‘Buy Rumors, Sell Facts’: Global Markets and Bitcoin Rise Following the FOMC Meeting

Despite the taper statements and disclosing that there will likely be three rate hikes next year, the Fed’s comments saw a market reaction opposite to what was predicted before the taper announcement. Nasdaq, NYSE, and the Dow Jones all saw gains after the FOMC meeting concluded. Speaking with Bitcoin.com News, Alex Kuptsikevich, the Fxpro senior market analyst, said the Fed “held the most hawkish edge of market expectations” on Wednesday.

“The FOMC announced that it would double the pace of tapering,” Kuptsikevich said. “The committee’s updated forecasts suggest three key rate hikes in 2022, although only six months ago, it expected none. We also heard that the balance of the Fed’s targets allows a rate hike to begin before achieving full employment due to higher inflation.”

“The Fed chairman also called financial asset valuations ‘elevated,’” the market analyst continued. “This is a clear signal of a willingness to hurt the markets, as he did in 2018. During the press conference, Powell noted that FOMC did not yet have a consensus on the timing of the Fed’s balance sheet cut. In the previous stimulus wind-down cycle, this was not an actual issue long after the start of the rate hike — The dollar index rallied within the first minutes after the FOMC, touching the highs from July 2020, but then it turned back down, losing 0.8% from the peak at the time of writing.”

Kuptsikevich added:

The feeling is that the markets have prepared for a risk-on, expecting softness from the Fed, and have not backed down despite the Fed’s rhetoric. Some commentators believe we saw a classical ‘buy rumours, sell facts’ reaction. However, the rise in ‘growth’ stocks speaks more about the market mood to end a strong year on a cheerful note. At the same time on the dollar, a wave of profit-taking growth in the last six months seems to have started, although the Fed’s stance is much more hawkish compared to other central banks from the DXY basket.

Even bitcoin (BTC) defied expectations on Wednesday, as the price kicked up a notch after the FOMC’s hawkish plans were announced. Just before the meeting ended, BTC was exchanging hands for $46,590 per unit and after the FOMC meeting came to a conclusion, BTC prices jumped to a $49,420 high on Wednesday afternoon (EST).

Bank of England Raises Benchmark Rate, European Central Bank Keeps Rates Held Down, US Jobless Claims Still Above Pre-Pandemic Levels

In addition to the FOMC meeting, the Bank of England (BoE) kicked up its benchmark rate to 0.25% from 0.1%. No other central banks have done this yet and the European Central Bank, like the Federal Reserve, kept its benchmark interest rate suppressed for now.

The European Central Bank explained that it will not raise borrowing rates until inflation settles. In addition, the U.S. weekly jobless claims published by the Labor Department indicate a rise last week. The Labor Department’s report shows jobless claims are still well above pre-pandemic levels.

What do you think about the Federal Reserve’s taper process and discussions about raising the benchmark rate three times in 2022? What do you think about the Bank of England raising its benchmark rate for the first time since the onset of the Covid-19 pandemic? Let us know what you think about this subject in the comments section below.

Filed Under: Alex Kuptsikevich, analyst, Bank of England, Benchmark Rate, Bitcoin, BoE, Central Banks, Coronavirus, COVID-19, Dollar Index, dow jones, Economics, economists, Economy, English, European Central Bank, Fed, Federal Reserve, FOMC, FOMC Meeting, fxpro, Global Markets, inflation, Jobless Claims, Monetary Easing, nasdaq, News Bitcoin, NYSE, QE, quantitative easing, stimulus, stocks, Supply & Demand, US economy

Macroeconomic Trends Boost Bitcoin and Gold, US Dollar Index Shows Bearish Double-Top

15/09/2020 by Idelto Editor

Macroeconomic Trends Boost Bitcoin and Gold, US Dollar Index Shows Bearish Double-Top

According to a number of reports and commentary from financial analysts, the world is “drowning in U.S. dollars” after the Federal Reserve decided to pump billions of dollars into the hands of 14 central banks via liquidity swaps. Moreover, recent technical analysis shows the dollar’s trade-weighted index chart indicates the USD might be in for a gigantic slide in value in the near future.

As members of the U.S. Federal Reserve plan to convene this week, both gold and bitcoin (BTC) markets have started to climb in value ahead of the meeting. Bitcoin prices rose over 4% during the afternoon’s trading sessions and gold jumped 0.76% as well. The price of one ounce of fine gold is $1,956.24 at the time of publication.

Macroeconomic Trends Boost Bitcoin and Gold, US Dollar Index Shows Bearish Double-Top

Meanwhile, after a brief upswing in value, the U.S. dollar has started to show signs of weakness again after losing massive amounts of value this year. One financial commentator believes the “world is frozen in response to the deluge of U.S. dollars.”

According to an article written by the business analyst, Stephen Bartholomeusz, “the world has been drowning in U.S. dollars” via “liquidity swaps with 14 central banks.”

“The combination of the access to dollars, the extent of the monetary policy stimulus in the U.S. and the Fed’s recent decision to hold U.S. rates at their current negligible levels – negative in real terms – has seen the U.S. dollar depreciate about 9.3 percent against the basket of its major trading partners’ currencies since March 19,” Bartholomeusz wrote. “That’s its weakest level for more than two years.”

Bartholomeusz added:

A weak dollar exports deflation elsewhere. It helps US exporters be more competitive (albeit while harming importers in an economy with a structural trade deficit) and therefore one that imports more than it exports) while damaging the exports and growth prospects of economies elsewhere.

In addition to Bartholomeusz’s ominous outlook, the U.S. dollar index (DXY) could see a sharper fall in the near future according to a technical analysis report published on Monday. The DXY technical analysis explains that charts show a “bearish, M-shaped chart pattern containing two peaks and a trough.”

Macroeconomic Trends Boost Bitcoin and Gold, US Dollar Index Shows Bearish Double-Top
U.S. dollar currency index on September 14, 2020.

If the dollar’s trade-weighted index dips another 5% the pattern will be confirmed the author notes. The pattern is traditionally dubbed the “bearish double-top” and they are typically followed by a strong decline in value.

“The most notorious double-top for the dollar came in 2001-2002, in the aftermath of the September 11, 2001 attacks on the United States, and was followed by a 33% fall in the currency through 2004,” the analysis details. “[The USD] then rallied for about 11 months before continuing its slide to record lows in 2008.”

When the members of the Fed meet on Tuesday and Wednesday, a number of analysts and economists think the meeting will fuel bitcoin and precious metals like gold. The cofounder of Gold Bullion Int. (GBI) and DTAP Capital, Dan Tapiero, championed the two assets after U.S. commercial real estate markets have started to show signs of pending disaster.

“An entire asset class redefined almost overnight by [Covid-19],” Tapiero tweeted. “Total value of all U.S. commercial real estate is $16 trillion. Now entering the largest bear market since the late 80s? 50% price drop wipes out $8 trillion. Major econ drag/knock-on effects [are] huge. Rates stay 0%, + Gold and BTC.”

A recent report published by Pacific Investment Management Co. (Pimco) also explained that the U.S. dollar value drop is just starting and there is “room for the world’s reserve currency to weaken against emerging markets.” Many emerging markets worldwide have advanced the use of crypto assets and decentralized finance (defi) markets.

What do you think about the world drowning in U.S. dollars and the predictions about a major USD decline? Let us know what you think about this subject in the comments section below.

The post Macroeconomic Trends Boost Bitcoin and Gold, US Dollar Index Shows Bearish Double-Top appeared first on Bitcoin News.

Filed Under: 14 Central Banks, bearish double-top, Bitcoin, BTC, Central Bank, Chart Pattern, COVID-19, crypto assets, Dollar, Dollar Index, DXY, Economics, Economy, English, Fed, Federal Reserve, gold, Liquidity Swaps, News Bitcoin, Pimco, Precious Metals, stimulus, USD

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