Bitcoin’s Reaction to Fed Rate Changes: Key Insights for Traders

Cryptocurrency

Summary:

After the recent Federal Open Market Committee meeting, the US Federal Reserve, yesterday, announced its plan to keep its federal funds rate unchanged at 4.25%-4.5%. Every FOMC meeting influences Bitcoin prices, sometimes causing major swings. In the last 24 hours, the price of BTC has seen a rise of 3.1%.

How the Fed’s Rate Hike Shook Bitcoin: An Overview

In April 2022, the Fed funds interest rate was as low as 0.5%. It was in May 2022 that the US Fed decided to revisit its interest rate policy. The primary reason was that the inflation rate had reached as high as 8.6% in May 2022. In June, the inflation rate touched a peak of 9.1% - the highest in a decade.

Between May 2022 and July 2023, the US Fed consistently pushed the interest rate upwards. By July 2023, it had reached as high as 5.5%. The level remained unchanged until August 2024.

In August 2024, the inflation rate fell to 2.5%. In fact, between June 2022 and June 2023, the rate declined consistently.

It was in September 2024 that the US Fed reversed its stance on the interest rate policy. In September, the interest rate was reduced from 5.5% to 5%. In November, it was lowered to 4.75%. In December, for the third time in 2024, it was brought down to 4.5%.

Bitcoin’s Response to Recent FOMC Meetings

In the March 2024 FOMC meeting, the US Fed decided to keep the interest rate unchanged at 5.5%. Initially, the Bitcoin market reacted positively, pushing the price to a new ATH. In April 2024, the market moved sideways, trading within a range of $71K and $61K.

In the May 2024 FOMC meeting, the Fed showed no interest in making any changes. The BTC market showed small signs of recovery.

In the June 2024 FOMC meeting, even though the Fed acknowledged the moderation in inflation, they decided to keep the interest rate unchanged. At one point in June 2024, the BTC price dropped as low as $58,360.67.

In the July 2024 FOMC meeting also, the Fed refrained from making changes. The BTC market plummeted sharply after the meeting. At one point on August 5, it dropped to a low of $48,919.60.

In the September 2024 meeting, the Fed reversed its interest rate policy. It reduced the rate by 25 basis points to 5%. Within ten days of the meeting, the Bitcoin price climbed by 10%. This marked the beginning of a new bull run in the market.

In the November 2024 meeting, the Fed implemented another 25 basis point reduction. November 2024 was a fantastic month for BTC. A favourable macroeconomic and political environment, fueled by Donald Trump’s victory in the US presidential election, contributed to Bitcoin’s steep growth.

In the December 2024 meeting, the Fed reduced the interest rate to 4.5%. It was the third and final reduction implemented by the Fed in 2024. In December, the BTC price touched a new ATH of 108K.

In the January 2025 FOMC meeting, the Fed returned to its “wait and watch” policy. It kept the interest rate unchanged at 4.5%. By January 2025, the Bitcoin market lost the bullish momentum, which had helped the asset reach its ATH of $109K.

Source: CryptoSlate

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Warren Takunda

Economic

Pay growth remained high at 5.8% in the three months to January, according to official data, maintaining the pressure on the Bank of England not to cut the cost of borrowing when it reveals its interest rate decision on Thursday.

The rate of pay growth fell slightly but remained well above inflation, indicating that employers continued to offer higher pay to secure skilled workers.

The fall to 5.8%, including bonuses, was in line with the forecasts of City economists and was 3.1% higher after taking into account inflation over the quarter.

Pay growth has now been above 4% for three years, the strongest run of pay growth since the Office for National Statistics (ONS) began recording the measure in 2001.

Bank of England policymakers would have had the data to hand when they met on Wednesday to consider cutting interest rates after a rise in unemployment and almost zero economic growth over the last six months. They are expected to keep rates level at 4.5% until the next meeting in May while pay growth remains elevated.

Unemployment remained the same in January at 4.4%, though the ONS warned that its labour force survey was likely to be heavily revised in the coming months. The statistics body has struggled to compile the survey since the pandemic hit after a large drop in the number of people willing to complete its survey forms.

Suren Thiru, the economics director at accountancy body the ICAEW, said the figures suggest falling business confidence meant the UK’s jobs market had little momentum.

He said: “Elevated wage growth is a double-edged sword for the economy because, while it’ll help boost consumer spending – a key driver of economic growth – it may limit the pace of interest rate cuts by fuelling fears over rising inflation.”

He said a rise in employers’ national insurance next month “could well trigger both moderately higher unemployment and weaker pay settlements”.

Earnings growth excluding bonuses was 5.9%: it was 6.1% for the private sector and 5.3% for the public sector. The ONS said the retail and hospitality sectors experienced the largest annual regular growth rate at 6.3%, followed by the construction sector at 6.2%.

Strong pay rises in these sectors mirrored large falls in employment, especially in the retail sector. The British Retail Consortium (BRC) calculated that over the past five years the industry had suffered a 249,000 drop in the number of jobs to 2.88m.

The ONS has tracked a steady fall in vacancies since 2022 to 816,000, though the figure remains above pre-pandemic levels.

Recent business surveys have shown a slight recovery in the demand for workers over the past month.

Sectors that have suffered over the past year, including IT services and construction, showed a recovery in job adverts, according to a labour market tracker published by Recruitment and Employment Confederation.

A separate recent survey by the ManpowerGroup recruitment agency found the demand for workers had stabilised, despite concerns about falling levels of business confidence before tax rises come in at the start of next month.

Employers’ national insurance contributions are due to increase next month, harnessing £25bn for the Treasury. The national minimum wage for over-21s will rise by 6.7% to £12.21 an hour.

Economists expect inflation-busting wage rises to feed through this year into higher household spending. A BRC survey found that confidence in the economy and respondents’ own finances had improved.

Source: Theguardian

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Economic

“There is a foundation to believe in the attractiveness of Europe, especially on a relative basis,” Francesco Ceccato, Barclays Europe CEO, told Euronews' Business Editor, Angela Barnes, in an exclusive interview.

“What we've seen in the year-to-date period is clearly a compression in the US stock market, for example, and an increase in the indices that I look at for the European stock market.”

According to a recent report from Morgan Stanley, European equities have this year outperformed US stocks by the widest margin since 2000.

The MSCI Europe Index has risen over 9% since January, beating the S&P’s slide of 4.5%.

To turn to the latest Fund Manager Survey from Bank of America, released this Tuesday, the data also showed the most significant rotation from US to European equities since records began in 1999.

A net 39% of fund managers now hold an overweight position in European equities, the highest level since mid-2021. On the other hand, 23% of investors report being underweight US stocks.

Despite the recent rally, researchers from Goldman Sachs have predicted that the uptick isn't fleeting. Last week, they suggested that European equities would rise as much as 6% in the next 12 months.

A tariff war

“There is clearly a lot of concern amongst the investors…around what some of the trade disruption might do to the economy,” Ceccato said, referring to tariff threats from US President Donald Trump.

The White House noted on Tuesday that new reciprocal tariff rates would take effect on 2 April, despite suggestions that they could be delayed.

While the US is looking to mirror some trade barriers established by other nations, it has also imposed another raft of levies.

Trump has - for instance - introduced a 25% tariff on all steel and aluminium imports. That’s as well as placing a 20% tariff on incoming Chinese goods and threatening a 200% levy on EU alcohol imports.

Trade policies are likely to have “significant” impacts on the US, said Ceccato, harming growth and pushing up inflation.

Ceccato added that Europe is also set to suffer from a tariff war, although economies could see a boost from extra defence spending.

"The euro area has roughly €480 billion of goods exports to the US. Now, at the moment, the latest models that our research team have looked at are relatively mild in terms of the tariff assumption that's being made. But were there to be a 25% tariff on all of those goods, that could actually tip the eurozone into recession,” he said.

Greater defence spending

Meanwhile, Germany’s parliament has just this week approved a reform of its debt brake proposed by chancellor-in-waiting Friedrich Merz, which allows for more fiscal flexibility.

Defence spending of more than 1% of GDP will be exempted from the strict debt limit and state governments will be allowed to run annual deficits of up to 0.35% of GDP. The bill will also establish a €500 billion fund to invest in the country’s ageing infrastructure.

On the prospect of greater military spending, Europe’s defence companies are cashing in. Rheinmetall shares are up around 124.8% in the year to date, Thales stock has jumped 79.2%, while shares in Leonardo have risen 82.9%.

Savings and Investments Union

Discussing how Europe can further improve its competitiveness, Ceccato noted that the EU still needs to work on developing deeper pools of capital.

“We also need to think creatively about how we can use…the firepower that we have in some of our European institutions to pair up with private capital, that is, institutional capital that can be brought to bear to tackle some of these Herculean challenges,” he said.

Ceccato explained that if Europe wants to effectively support its industries, it cannot solely rely on retail investments made by members of the public.

Compared to EU firms, companies in the US still find it easier to access capital due to the scale of the market and flexible funding options. A more risk-averse sentiment in the EU, as well as a more fragmented financial market across diverse member states, can hamper innovation.

"This is still all about capital, capital, capital," said Ceccato.

Source: Euronews

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Economic

Australia reported a surprisingly large slump in employment of 52.8k, whereas the consensus looked for an increase of 30k for February.

The previous month's figure was lowered to 30.5K and the participation rate fell to 66.8% from 67.2%, leaving the unemployment rate unchanged at 4.1%.

Following the release, money markets raised the odds of a May rate cut at the Reserve Bank of Australia (RBA) to 74%, compared to 62% prior to the release.

This adjustment prompted a fall in Australian bond yields, which automatically weighed on AUD.

"AUD/USD slumped by around 0.5% after the unusual configuration of Australian labour market data," says Joseph Capurso, an economist at Commonwealth Bank of Australia.

The Pound-to-Australian Dollar exchange rate (GBP/AUD) is up half a per cent at 2.0546.

However, breaking down the data reveals some curious developments that suggest the moves should fade.

The ABS says the fall in employment was largely due to older workers aged 55 and over opting not to return to work in February.

"We don’t think this print in isolation will have a material impact on the RBA’s monetary policy decisions moving forward. Labour market fundamentals remain solid, with an overall robust trend in employment growth," says Aaron Luk, an economist at ANZ.

The ABS noted "higher levels of retirement in Australia in recent months", which also explains the downside surprise for the participation rate.

"As cost-of-living pressures have moderated, the impetus for marginal workers to remain in the labour force has diminished," says Ryan Wells, an economist at Westpac.

Westpac's stance is that the RBA "is unlikely to read too much into this month’s data," owing to the underlying trends, which suggests scope for financial market moves to fade.

Australian Dollar price action should increasingly shift to the U.S. tariff announcement due on April 02, where significant downside risks lie for trade-sensitive currencies like the AUD.

Source: Poundsterlinglive

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Glendon

Economic

Forex

(Bloomberg) -- Swiss National Bank officials cut their interest rate to the lowest since September 2022 to deter inflows into the franc, and declared another reduction is less likely for now.

Officials led by President Martin Schlegel trimmed their benchmark by a quarter point to 0.25% on Thursday, in a step anticipated by traders and a large majority of economists. He signaled to reporters in Zurich that the central bank doesn’t anticipate more easing at the current juncture.

“This rate cut has an expansionary impact,” Schlegel said. “In that sense, the probability of additional policy easing is naturally lower.”

The SNB’s fifth step in the current cycle leaves its rate at the lowest of any managing the world’s 10 most-traded currencies. Analysts largely reckon that this was its final reduction of the cycle.

The Swiss franc erased gains after the decision, traded slightly lower at 0.9572 versus the euro. Swaps pricing indicates traders expect no more rate cuts by the SNB this year.

The central bank’s activism contrasts with the hesitancy to ease further by global peers such as the US Federal Reserve, which on Wednesday acknowledged a backdrop of high uncertainty. Similarly, Sweden’s Riksbank kept borrowing costs unchanged and said it has finished cutting.

The SNB move, following up on a surprise half-point reduction in December, shores up its foreign-exchange policy in anticipation of volatile times ahead. While the franc has weakened this year, the currency remains a potential haven for investors guarding against instability just as US President Donald Trump ratchets up global trade tensions and war continues to rage in Ukraine.

“We also remain willing to be active in the foreign exchange market as necessary,” Schlegel said, sticking with the SNB’s standard language, as observed how the backdrop has shifted. “Uncertainty about global economic and inflation developments has increased significantly.”

What Bloomberg Economics Says...

“This decision reflects the increased uncertainty around the inflation outlook amid threats of tariffs and a high level of geopolitical uncertainty, both of which could put upward pressure on the currency. The decision can be seen as insurance against those risks.”

—Jean Dalbard, economist.

The reduction might pre-emptively dissuade inflows, but also uses up precious room for easing before reaching zero, which is now just one conventional quarter-point step away.

Dropping the rate to that level would force officials into a tough choice between market interventions to repel foreign-exchange speculation or else going negative again, as they did in the period from 2015 until 2022.

While subzero borrowing costs inflict pain on the country’s financial system, selling the franc could potentially drawing the ire of Trump, whose administration branded Switzerland as a currency manipulator when he was last in office.

Data released this week showed the SNB largely kept out of foreign exchange markets in the final three months of 2024, marking a full year without sizable interventions. While the franc rose against the euro after Trump’s election in November, it erased those gains and has since weakened.

“I can clearly say Switzerland is not a currency manipulator,” Schlegel told Bloomberg Television on Thursday. Past “interventions were necessary to maintain price stability,” he said. “This was not to gain competitive advantage for Switzerland.”

The decision to cut and contain market pressure is intended to stop strength in the currency from lowering import costs too far, hurting inflation. Consumer-price growth has weakened considerably from a peak of 3.5% to reach near zero in February.

Officials slightly lifted their forecast for 2025 inflation on Thursday. They now expect it to average 0.4% this year, and 0.8% in 2026 and 2027, after it was previously seen at 0.3% in 2025 and 0.8% in 2026.

The outlook for inflation “is currently very uncertain,” Schlegel said. “The risks are predominantly to the downside.”

Policymakers kept intact their outlook for Switzerland’s economy after the strongest expansion in almost two years last quarter. The SNB still expects growth in a range of 1-1.5% this year.

“This was the last rate cut of the SNB this year,” said Karsten Junius, the chief economist at Bank J Safra Sarasin. “Upward revisions of the inflation profile indicate that no further rate cut is needed.”

Source: Yahoo Finance

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Economic

The New Zealand economy was surprisingly strong in the final quarter of 2024, but the New Zealand Dollar is struggling.

The New Zealand economy grew 0.7% q/q in Q4 said Statistics New Zealand, exceeding estimates for 0.5% and the Reserve Bank of New Zealand's projection of 0.3%.

"Today’s print confirms that New Zealand has likely passed the worst of its downturn," says Bader Al Sarraf, an analyst at Standard Chartered.

The NZD should be rallying on the news as the strong outcome provides some cover for the Reserve Bank of New Zealand (RBNZ) to stop cutting interest rates, removing a major drag on the currency.

The market reaction suggests this is unlikely to happen:

The Pound-to-New Zealand Dollar exchange rate (GBP/NZD) is half a per cent higher on the day at 2.2480 and EUR/NZD is 0.56% higher at 1.8850.

NZD/USD is three-quarters of a per cent down at 0.5772.

So why is the New Zealand Dollar weaker despite the strong GDP data?

Currency analysts say a selloff in the Australian Dollar following surprisingly poor labour market data is weighing on the New Zealand dollar.

"NZD/USD fell by around 0.5% alongside a lower AUD," says Joseph Capurso, an economist at Commonwealth Bank of Australia.

On the same day NZ GDP numbers were released, Australian employment figures came out, showing a significant 52.8k fall (it was expected to rise by 30k) in February.

And, the previous month's number was revised lower to a 30.5k increase.

New Zealand Dollar is Dropping, Despite Genuine Good Economic News_1

Above: The NZD falls against GBP as Australian bond yields fall (lower panel). This confirms expectations for a quickening in rate cuts in Australia is weighing on NZD.

The Australian labour market data surprise prompted markets to increase expectations for an acceleration in interest rate cuts at the Reserve Bank of Australia.

This weighed on Australian bond yields, pulling the closely correlated New Zealand bond yield lower. The AUD and NZD were, in turn, dragged lower by falling yields in both countries.

In short, markets see a slowdown on Australia being bad for New Zealand, regardless of the solid Q4 economic data.

Economists at Auckland-based ASB say they are sceptical that the growth drivers in Q4 can maintain their pace given the broader global headwinds.

They, like other analysts, think more rate cuts are in store for New Zealand.

"While today’s print confirms that New Zealand has likely passed the worst of its downturn, we believe growth remains well below potential, and output is still far from levels that would threaten inflationary stability," says Standard Chartered's Al Sarraf.

"We expect the RBNZ to look through this stronger-than-expected Q4 print, as it has already placed greater weight on high-frequency indicators, which remain consistent with gradual monetary easing," adds Al Sarraf.

Markets are currently about 70bp of RBNZ interest rate cuts by year-end, which is weighing on New Zealand yields and its Dollar.

Source: Poundsterlinglive

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Michelle

Economic

Forex

ZURICH (March 20): The Swiss National Bank cut its policy interest rate by 25 basis points on Thursday, leaving borrowing costs just above zero, arguing that inflationary pressures were low despite uncertainty over the impact of US President Donald Trump's trade policies.

The SNB reduced its key rate to 0.25% from 0.5%, its fifth successive cut since it started lowering borrowing costs in March 2024, matching economists' expectations in a Reuters poll.

The Swiss franc weakened slightly against both the euro and the dollar after the decision.

It was last flat at 0.95705 against the euro, having traded around 0.9537 earlier and at 0.8803 to the dollar, leaving the US currency up 0.4% on the day.

"The SNB was not only the first big central bank to have started cutting rates in this cycle, with this step today, it likely is also the first one to have finished cutting rates," said Karsten Junius, chief economist at Bank J Safra Sarasin.

"The upward revisions of inflation profile indicate that no further rate cut is needed."

The decision comes on a busy day for central banks, with the Bank of England and Sweden's central bank also due to announce their policy decisions on Thursday.

The US Federal Reserve on Wednesday held interest rates steady, citing a period of "unusually elevated" uncertainty linked to the initial policies of the Trump administration.

The new 0.25% rate is the SNB's lowest since September 2022, and brings it close to sub-zero interest rates again, a move it has previously not ruled out.

"With today's rate adjustment, the SNB is ensuring that monetary conditions remain appropriate, given the low inflationary pressure and the heightened downside risks to inflation," the SNB said.

The cut aims at preventing a further decline in Swiss inflation, which eased to 0.3% in February, its lowest level in nearly four years, and keeping it within the 0-2% target range which the central bank defines as price stability.

The SNB said that its baseline scenario anticipated that global growth will be moderate over the coming quarters and that underlying inflationary pressure should continue to ease gradually over the next quarters, particularly in Europe.

It noted, however, that this scenario for the global economy is currently subject to high uncertainty.

"The situation could change rapidly and markedly, particularly from a trade and geopolitical perspective. For example, increasing trade barriers could lead to weaker global economic development," it said.

"At the same time, a more expansionary fiscal policy in Europe could provide stimulus to the economy in the medium term."