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Fed and ECB slam brakes on rate hikes with cautious pivot – Will crypto survive?

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TL;DR

  • Global markets get a moment of relief as the ECB and the Fed shift their aggressive approaches to hikes and are now focused on cautionary, measured data-informed actions. 
  • Fed and ECB have a vision of balancing inflation, reducing it, and upholding mindfulness in regard to implications to the economic status. 
  • The crypto markets are showing a sign of survival, with Bitcoin trading at $37,657.60 today, representing a Bitcoin dominance of 49.19%. Also, the global crypto market cap stands at $1.49 Trillion.

Despite the subtle differences, the ECB and the Fed have both shifted their aggressive approaches to hikes and are now focused on more measured, data-informed actions. Their major focus is on controlling inflation and balancing economic growth. In turn, their efforts aim to influence the EUR/USD outlook, hinting at evolving data on inflation. 

The recent reports referring to the minutes of the FOMC meeting confirm these intentions by the two regulatory authorities. Will these new developments affect inflation, balance it, and influence the market movements of the EUR/USD trend? This is yet to be confirmed as the Fed and ECB eye a new venture. 

Fed and ECB minutes overview – Details

The Federal Open Market Committee (FOMC) presented its latest United States Federal Reserve minutes and highlighted its intentions toward interest rates and future hikes. The committee strongly addressed their stance that future rate hikes would be possible if there was hesitation in controlling inflation. 

The new proceedings come in as a new approach from its aggressive interest rate hikes over the past 20 months, and this shift might give positive results. The Fed focuses primarily on the timeframe within which they can maintain and implement their policy rate in a 5.25% -5.50 % range. This is a positive view since it shows a pivotal role being played by the Fed’s in balancing economic growth support and controlling inflation. 

The European Central Bank (ECB) meeting minutes are in contrast to the Fed’s and suggest a slightly different approach. The ECB hasn’t shown any resilience and confirmed its intention to hike its rates if the need arises. This is regardless of their recent action on halting their rate hike cycle and pinning a 4% deposit rate. 

Both parties, the Fed and the ECB, have shown their cautious steps in declaring a win against inflation based on the noted disinflation process. This comes in as the minutes suggest that the ECB also has its vision of balancing inflation and reducing it but also upholds mindfulness in regard to implications to the economic status. 

Impact of the minutes to EUR/USD

Given these endeavors by the central authorities, will EUR/USD be ready for a shift in market movement? Based on the monetary policy stance currently employed by the ECB and the Fed, the EUR/USD pair hunts on evolving inflation data for Europe and the US. 

The EUR might register strong support against the USD. This can be attributed to the ECB not backing down from a necessary increase in their rates while the Fed decided to pause its rate hike cycle. Regardless, inflation rebounding could be a sign of an intended robust expectation for the United States’ shifting balance. 

All these implications would affect EUR/USD in the short term and might experience an increase in volatility with a bias favoring EUR. The strengthening of the euro is expected amid the continuation of the downward trajectory of Eurozone inflation, which was also expected. 

Both the European Central Bank and the Federal Reserve are battling high inflation challenges. The Central authorities understand that the pike in their aggressive monetary tightening might end. They are prepared to act if inflation keeps up its aggressive hold and if their anticipations aren’t met. This also proves the keen eye that the central banks keep on inflation rates and their intended policy adjustment if inflation keeps its hike. 

The minutes from the Fed explained the concerns about over-tightening that could potentially harm the future of economic prospects. This comes amid the recent growth spurt of the US economy. ECB also mentioned their view on the same and noted that over-tightening policies could reduce the effectiveness of their strides in the labor market. 

As such, this shows dedicated navigation between the two central authorities in controlling inflation that would aid in maintaining the sustainable growth of the economy. Crypto markets are green with the hope of a near bull run in no time.

At the time of writing, Bitcoin (BTC) is currently trading at $37,657.60, with a 24-hour trading volume of $13,910,727,103.91. This is a 0.24% increase in the previous 24 hours and a 3.59% increase in the last 7 days. 

The global market valuation is now $1.49 trillion, a 0.85% increase over the last 24 hours and a 71.29% increase over a year ago. Bitcoin has a market cap of $735 billion as of today, signifying a 49.19% domination. Meanwhile, the market cap of stablecoins is $129 billion, accounting for 8.63% of the total crypto market cap.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Florence Muchai

Florence is a crypto enthusiast and writer who loves to travel. As a digital nomad, she explores the transformative power of blockchain technology. Her writing reflects the limitless possibilities for humanity to connect and grow.

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