This Wednesday, the crypto market is up almost 2%. An increase that many analysts explain by market expectations, a relaxation of monetary policy. Answer in the early evening!
Are we heading towards a reduction in the rise in interest rates?
For several months, the FED has been on a merciless crusade against inflation. While the country of Uncle Sam was hit by the worst inflationary wave for more than 40 years, the country’s central bank significantly increased its key interest rates. During the last 4 meetings, rates have been systematically increased by 75 basis points. The next meeting scheduled for December 14 could be different.
Indeed, for several days, the markets have been anticipating that the rise will slow down at this next meeting. Today, the consensus of economic players seems to be heading for an upcoming hike of 50 basis points. As illustrated in the graph below, taken from the CME Group platform.
While interest rates are currently between 375 and 400 basis points, 65.1% of economic players believe that the increase at the next meeting will be limited to 50 basis points. They are a little more than a third to estimate that the FED will maintain the same monetary policy as at the last 4 meetings. Such a scenario would obviously be negative for risky markets, on a short-term approach.
If the analysis of the consensus is interesting, it is even more pragmatic to understand its evolution. And on this point, it would seem that the economic players have a changing opinion. A month ago, no consensus really emerged since around 50% of respondents expected a future rise to 50 basis points. The other half then evoked a continuous increase to 75 basis points. Last week, the consensus was much more bullish to 50 basis points. Such a level of increase was then anticipated at 75%.
The crypto market is eagerly awaiting the speech!
During the day, the crypto market evolved in the green, pending the speech of the boss of the FED, Jérôme Powell. According to data from Coinmarketcap, the market would be up more than 2% over the past 24 hours. The price of Bitcoin gained 2.4% while Ethereum posted an increase close to 5%. Among the major altcoins, Polygon (MATIC) is gaining the most from the session (+5%) while BNB and Solana (SOL) are showing some neutrality.
On the equity market, caution prevails. Thus, the Nasdaq 100 index climbed only 0.30% during the day’s session. The same is true for the S&P 500, which is posting a slight decline: –0.17% at the time of writing these lines. In Europe, it is also the wait-and-see attitude that seems to dominate. During the day’s session, the DAX 30 posted a slight increase (+0.29%) while the FTSE 100, the main index of the London Stock Exchange, posted an increase of 0.81%.
Anyway, the speech scheduled for this evening should clarify the situation and the position of the American central bank.
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What about the next deadlines?
For the equity market as for that of digital assets, prices will come and go at the rate of the evolution of the FED’s monetary policy.
As for the impact of Jerome Powell’s speech, see you in a few minutes, since the leader will deliver his speech from 7:30 p.m. French time.
In two days, the markets will also scrutinize the publication of unemployment figures in the United States by the American Department of Labor. Because beyond the control of inflation, the FED seeks to measure the impact of its monetary policies on employment. The US inflation figures for November will be published on December 13, the day before the Fed’s FOMC meeting.
In the coming weeks, monetary policy decisions will therefore continue to fuel the markets.
