The cryptocurrency market remained subdued during the European morning session, influenced by a hawkish reassessment of Federal Reserve interest rate cuts that supported the U.S. dollar ahead of a crucial inflation report.
Bitcoin (BTC), the leading cryptocurrency by market capitalization, was trading around $61,000, a slight increase from the overnight low of $60,400 but still down over 1.5% in the past 24 hours. Similarly, Ether (ETH) saw a decline of 1.9%, trading at $2,395. Other prominent altcoins, including BNB and SOL, were down 1%, while XRP dropped 0.6%, according to data from CoinDesk.
The U.S. dollar index (DXY), which measures the greenback’s value against major fiat currencies, rose to 102.97, marking its highest level since August 16. This represents a cumulative gain of 2.7% since the September 30 low of 100.18, based on data from TradingView.
The CME’s FedWatch tool indicated that traders now assign an 85% probability to the Fed cutting interest rates by 25 basis points at its upcoming meeting on November 7, up from 65% a week earlier. Previously, markets estimated a 35% chance for a more aggressive 50 basis-point cut by year-end following the Fed’s initial cut in September.
The release of a strong nonfarm jobs report on Friday reignited discussions about U.S. economic resilience, prompting traders to reevaluate expectations for quicker and larger rate reductions. Minutes from the September Fed meeting, released Wednesday, revealed divisions among policymakers regarding the aggressiveness of potential rate cuts, with “a substantial majority” favoring a 50 basis-point reduction, though some expressed reservations.
Alex Kuptsikevich, a senior market analyst at FxPro, noted in an email that crypto market sentiment has slipped back into the “fear zone” at 39, contrasting sharply with a “greed” reading of 72 in equities. He attributed this shift to the dollar’s appreciation and the growing appeal of bonds, which have diminished institutional interest in Bitcoin.
Looking ahead, Kuptsikevich cautioned that Thursday’s U.S. inflation report could introduce market volatility if the results diverge from expectations. The report, scheduled for release at 12:30 UTC, is anticipated to show a 0.1% month-on-month increase in the consumer price index (CPI) and a 2.3% year-on-year rise for September. This follows a 0.2% month-on-month increase and a 2.5% year-on-year increase in August. The core CPI, which excludes food and energy prices, is expected to register a 0.2% month-on-month increase and a 3.2% year-on-year increase, according to FXStreet.
Should the CPI data exceed expectations, it could bolster arguments against further rate cuts, potentially enhancing the dollar’s upward momentum and fueling risk aversion in the market. However, ING suggested earlier this week that the CPI figures are unlikely to cause significant shifts in market positioning, as the Fed’s focus appears to have pivoted towards the labor market.
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