The dollar retreated on Wednesday ahead of the Federal Reserve (Fed) Chairman’s hearing before Congress, including data that could confirm expectations of an imminent interest rate cut, while bitcoin and gold remained close to their record highs.
Fed chair Jerome Powell is due to answer questions from a House of Representatives committee on Wednesday and Thursday.
After the disappointing US economic data published in recent days, “Market expectations are for three to four rate cuts for 2024,” which is not far from the forecasts of members of the monetary institution who anticipate three cuts, according to analysts at Deutsche Bank.
For them, it will be interesting to see whether Powell still validates this message, as we are only a few weeks away from new projections for the evolution of key rates, on the occasion of the Fed’s Monetary Policy Committee meeting.
For the time being, economists are counting on a first rate cut around June. On Thursday, the European Central Bank (ECB) is due to make its own decision about rate cuts.
Traders were also awaiting a monthly report on US private-sector job creation for February. This will be followed by weekly jobless claims on Thursday and the US Labor Department’s monthly report on Friday.
“Sufficiently weak data would make Powell’s job easier on the first rate cut, while a stronger-than-expected set of data would prompt Fed watchers to question whether (the Fed) should cut rates at some point this year,” believes Ipek Ozkardeskaya, analyst at Swissquote, quoted by AFP.
Despite the UK’s tight public finances, British Finance Minister Jeremy Hunt is due to announce tax cuts later today, along with the latest economic forecasts from the government’s Office for Budget Responsibility (OBR).
“We don’t expect this budget to contain anything that will cause sterling to fall,” thinks XTB analyst Kathleen Brooks, “nor influence UK bond yields, unless the OBR forecasts suggest that further fiscal action would be inflationary.”
Following Tuesday’s all-time high of $2,141.79, gold was down just 0.03% at $2,127.40.
Its price remained buoyed by “increased bets that the Fed will cut interest rates as early as June—a favorable factor for non-yield-bearing assets such as precious metals,” summarized Frank Watson of Kinesis Money.
For its part, bitcoin, which had fallen back heavily from its own all-time high of $69,191 on Tuesday, recovered 4.89% of its value to $66,432.
“Fundamentally, demand is increasing thanks to the introduction of a new investment on the US market, the bitcoin ETF, which facilitates investment in crypto-currencies for institutional players,” Ipek Ozkardeskaya points out.
The analyst also mentions “halving,” or reducing by half, bitcoin supply, scheduled for April, that would make the cryptocurrency scarcer and therefore increase its price.
