US Dollar Weakens: Gold and Bitcoin Eye New Highs

The US dollar weakens as the Fed hints at rate cuts; Gold and Bitcoin anticipate new highs ahead of the US NFP release.

Financial markets brace for potential rate cuts by the Fed and ECB, driving the US dollar lower.

In testimony to the Senate Banking Committee, Federal Reserve Chair Jerome Powell hinted at forthcoming interest rate decreases, signaling a potential shift in monetary policy.

Powell stated, “If the economy performs as anticipated, we are considering gradually easing the current policy stance over the year.” He emphasized the need for confidence in sustained inflation levels at 2% before initiating any adjustments, aiming to avoid economic downturns.

Meanwhile, the European Central Bank (ECB) maintained its monetary policy but revised growth and inflation forecasts downward during a press conference by ECB President Christine Lagarde. Lagarde hinted at potential rate cuts in the future, stating, “We are progressing towards our inflation target, but we need more evidence and data for confidence.”

US Dollar Weakens: Gold and Bitcoin Eye New Highs

Market sentiments have adjusted to anticipate rate cuts. A 25bp ECB rate cut is expected in June, and a similar-sized Federal Open Market Committee (FOMC) rate cut in the same month, with probabilities in the mid-high 70% range.

These speculations have contributed to the weakening of the US dollar, with the US dollar index sliding to a near-two-month low of 102.85, following a multi-week high of 105.02 in mid-February. Concurrently, gold prices have surged from $1,984/oz. to a fresh high of $2,164/oz.

The latest US Jobs Report (NFPs) due today is poised to influence market dynamics leading into the weekend. Analysts anticipate that a better-than-expected NFP figure may briefly stabilize the US dollar’s decline. At the same time, a lower-than-expected outcome could further weaken the currency, driving gold prices higher.

Bitcoin traders are also monitoring the NFP report as the cryptocurrency aims to retest its all-time high. Demand-supply imbalances, driven by spot Bitcoin ETF demand and an upcoming halving event, are vital factors propelling Bitcoin’s recent rally. Positive technical indicators suggest the potential for fresh record highs in the coming days.

As financial markets await the NFP release, the interplay between central bank policies, economic data, and investor sentiments continues to shape the trajectory of major currencies and assets like gold and Bitcoin.

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