Bitcoin inches down as risk appetite tumbles ahead of US inflation data
Bitcoin lost modest ground on Friday, relinquishing some earlier gains as the risk appetite softened amid uncertainty about the Federal Reserve’s monetary policies.
The world’s most valuable cryptocurrency marked modest gains this week alongside other cryptocurrencies following the Israel-Iran ceasefire.
Bitcoin dipped 0.3% to $107,542 this morning, on track for a weekly profit of 5%.
Despite the calm following the Israel-Iran ceasefire, uncertainty about the Federal Reserve’s independence and its future interest rate plans hurt the risk appetite.
Trump once again criticized Powell for refusing to cut interest rates, and asserting Powell will leave his position soon.
Powell told the Senate of the need to be cautious with monetary policies, as Trump’s tariffs represent a risk to inflation.
Powell warned that while Trump’s tariffs could cause a one-time hike in prices, the risk of sustained inflation is big enough to force the Fed into more caution about rate cuts.
The Wall Street Journal reports that Trump is considering choosing and announcing his successor by September or October as a way to undermine him.
Bitcoin Grabs Headlines Once More
Bitcoin continues to grab glocal headlines, with some Indian politicians calling for buying bitcoin as a strategic reserve.
This is part of an increasing global trend among governments and institutions to expand bitcoin adoption as a reserve and maybe even a safe hafe of sorts.
It’s charting a similar story to gold in its earlier reserve days worldwide, with bitcoin likely going on a similar acceptance path as a value store.
Trump once again criticized Powell for refusing to cut interest rates, and asserting Powell will leave his position soon.
Powell told the Senate of the need to be cautious with monetary policies, as Trump’s tariffs represent a risk to inflation.
Powell warned that while Trump’s tariffs could cause a one-time hike in prices, the risk of sustained inflation is big enough to force the Fed into more caution about rate cuts.
The Wall Street Journal reports that Trump is considering choosing and announcing his successor by September or October as a way to undermine him.
Strong Institutional Demand
Bitcoin is buoyed by rapidly increasing institutional demand, with SoSoValue data showing net investments into bitcoin sport ETFs at $547 million, with total weekly inflows amounting to $1.49 billion so far.
Otherwise, major corporations continue to add to their bitcoin holdings, with Japan’s MetaPlanet adding 1234 units on Thursday, raising its total holdings to 12,345 units.
PtoCap BTC also bought 1208 bitcoins, raising total holdings to 4932 units.
US dollar approaches 3-1/5 year nadir on Fed rate cut bets
The US dollar fell to near 3-⅕ year lows against both the euro and sterling on Friday as traders bet on multiple Fed rate cuts this year, while waiting for the results of US trade negotiations with major partners before the July deadline.
The euro was boosted after recent French data showed consumer prices rose more than expected in June.
The euro rose 0.2% to $1.17208, approaching September 2021 highs at $1.1745.
Sterling traded at $1.3742, slightly off October 2021 highs at $1.37701.
Trump Versus Powell
Trump once again criticized Powell for refusing to cut interest rates, and asserting Powell will leave his position soon.
Powell told the Senate of the need to be cautious with monetary policies, as Trump’s tariffs represent a risk to inflation.
Powell warned that while Trump’s tariffs could cause a one-time hike in prices, the risk of sustained inflation is big enough to force the Fed into more caution about rate cuts.
The Wall Street Journal reports that Trump is considering choosing and announcing his successor by September or October as a way to undermine him.
Sixth Straight Monthly Loss
The US dollar index is heading for a 2.3% loss in June, the lowest since March 2022, and marking the sixth monthly loss in a row.
The dollar index is down 10% so far this year, but it faces even more pressures as the Federal Reserve gears up towards multiple interest rate cuts this year.
Otherwise, a weaker dollar pushed the Aussie to a seven-month peak at $0.6564 on Thursday.
Other emerging currencies also surged, with the Taiwanese dollar up to April 2022 highs.
Fed Rates
Fed official Michelle Bowman said on Monday that the time for an interest rate cut is approaching amid potential risks to the labor market.
The odds of a Fed 0.25% rate cut at the July meeting rose from 15% to 23% according to the Fedwatch tool.
The odds of a Fed September rate cut rose from 68% to 78%.
The bonds market is mostly stable, with two-year US treasury yields down 0.01% to 3.77%.
Gold heads to second weekly loss in row as haven demand recedes
Gold prices fell on Friday on track for the second weekly loss in a row as haven demand receded after the Israel-Iran ceasefire and the progress in US-China trade talks.
Gold spot prices fell 1.2% to $3288 an ounce, marking a weekly drop of 2.3%, while US gold futures fell 1.4% to $3300.
Improving Risk Appetite Pressures Gold
As the Middle East tensions calm down, with both Iranians and Israelis resuming their normal lives after 12 days of the worst military confrontation ever between both countries, demand on gold and other safe havens took a hit.
US-China Rare Earth Minerals Agreement
White House officials said the US reached an agreement with China to accelerate shipments of rare earth minerals to the US.
Now investors await US Core Personal Consumption Expenditure data later today, crucial for Fed’s monetary policies.
Analysts expect a 0.1% monthly increase and a 2.6% yearly increase.
US Interest Rates
Markets currently expect US interest rates to be down by 63 basis points this year, starting September.
As for the performance of other precious metals:
Spot silver prices fell 0.5% to $36.44 an ounce
Platinum lost 2.8% to $1378 an ounce away from 11-year highs
Palladium rose 0.3% to $1135 an ounce, the highest since October 2024
Euro rises to 2021 highs against US dollar
The euro rallied to four-year highs against the dollar as investors await the results of the US-Eurozone trade negotiations before the final July deadline.
As the Iran-Israel geopolitical tensions calm down following the ceasefire, the markets now focus on the US monetary policy.
A recent announcement by US President Trump on choosing an early candidate for the Fed Chair job to undermine Powell, raised concerns about the independence of the Fed.
Trump once again criticized Powell for refusing to cut interest rates, and asserting Powell will leave his position soon.
Powell told the Senate of the need to be cautious with monetary policies, as Trump’s tariffs represent a risk to inflation.
Euro Performance
The EUR/USD pair fell mildly to $1.16885, after hitting September 2021 highs earlier at $1.1745.
The dollar index remains near March 2022 lows at 97.398 on track for a 2% loss in June, the sixth consecutive month of losses.
Investors await any signs of progress in the US-EU trade negotiations, with the German Chancellor Merz calling for a “quick and simple trade deal” with the US.
US-China Rare Earth Minerals Agreement
White House officials said the US reached an agreement with China to accelerate shipments of rare earth minerals to the US.
Otherwise, a weaker dollar pushed the Aussie to a seven-month peak at $0.6564 on Thursday.
Other emerging currencies also surged, with the Taiwanese dollar up to April 2022 highs.
France Calls for Steps to Boost Euro
France has pushed EU members to take additional measures to boost the euro’s status as the world’s global currency reserve.
It’s a years-long push from Paris to support joint borrowing and fiscal unity among EU members to underline the euro’s position around the world.
IMF Chief Gorgeiva also said there’s a huge opportunity for the euro to play a larger global role, which is another sign of the decline of the dollar’s appeal worldwide.
ECB President Christine Lagarde called this “the euro’s global moment”, but EU countries need to reform to take this chance and provide a larger offering of safe havens.
She noted that total EU debt is only 89% of total GDP, compared to 124% in the US, giving the EU a unique chance at providing high-quality safe assets.