Dollar in doldrums as Fed rate-cut bets build; bitcoin soars to record high

CNBC

2 days ago

The dollar languished near multi-week lows against the euro and sterling on Thursday as traders ramped up bets for the Federal Reserve to resume cutting interest rates next month.
Rising expectations for Fed easing combined with increasing institutional cryptocurrency investment sent bitcoin powering to a fresh record peak.
The dollar index, which measures the currency against the euro, sterling and four other major peers, was steady at 97.704 as of 0002 GMT. It dropped some 0.8% over the previous two sessions, having dipped to 97.626 on Wednesday for the first time since July 28.
The euro edged up to $1.1713, nearing Wednesday's high of $1.1730, a level last seen on July 28.
Sterling rose to $1.3586 for the first time since July 24.
Against Japan's currency, the greenback lost 0.3% to 146.95 yen.
Fed rhetoric has turned overall more dovish of late, amid signs of a cooling labor market and with President Donald Trump's tariffs not adding to price pressures in a significant way as of yet.
Traders see a Fed rate cut on September 17 as a near certainty, according to LSEG data, and even lay around 7% odds on a super-sized half-point reduction.
"For the markets, it's not even a matter of if the Fed cuts interest rates in September, it's a question of how much," said Kyle Rodda, an analyst at Capital.com.
"Signs of a downturn in the labor market have pushed futures to bake in a series of rate cuts before the end of the year."
On Wednesday, Treasury Secretary Scott Bessent called for a "series of rate cuts," and said the Fed could kick off the policy rate easing with a half-point cut.
Trump has repeatedly criticized Fed Chair Jerome Powell for not easing rates sooner.
A weaker dollar, the specter of political interference in U.S. monetary policy, and the increase in investor risk appetite amid Fed easing prospects all converged to buoy bitcoin to its first record peak since July 14, pushing as high as $123,674.71 in the latest session.
Bitcoin was already underpinned by increased institutional money flows this year in the wake of a spate of regulatory changes spearheaded by Trump, who has billed himself the "cryptocurrency president."
In the latest move, an executive order last week paved the way to allow crypto assets in 401(k) retirement accounts.
"Corporate treasuries like MicroStrategy and Block Inc. continue to buy bitcoin," said IG analyst Tony Sycamore.
"Technically, a sustained break above $125,000 could propel bitcoin to $150,000."