Dollar Slips as Investors Await U.S. Inflation Data; Bitcoin Volatile After Fake SEC Message
The dollar saw a slight decline on Wednesday as cautious investors awaited U.S. inflation data set to be released later in the week. Meanwhile, bitcoin experienced volatility after a fake message was posted on the U.S. Securities and Exchange Commission’s (SEC) social media account.
The SEC reported that someone briefly accessed its X social media account and posted a false message claiming the approval of exchange traded funds (ETFs) for bitcoin. This news was eagerly anticipated by the crypto industry, but the SEC clarified that it had not yet approved spot bitcoin ETFs. As a result, bitcoin slid 1.3 percent to $45,516 after reaching a 21-month peak of $47,897 on the fake post.
The potential approval of ETFs by the SEC, which could attract billions in new investments, has been a driving force behind the recent surge in bitcoin prices. However, Chris Weston, head of research at Pepperstone, believes that most investors have already factored in the possibility of approval from the SEC.
In the meantime, the dollar index, which measures the U.S. currency against six major rivals, edged 0.09 percent lower to 102.41. This comes after a 0.215 percent gain on Tuesday.
The index has seen a 1 percent increase this month, following a 2 percent drop in December as traders reassess their expectations for rate cuts by the Federal Reserve. In December, the Fed surprised the market by projecting 75 basis points (bps) of rate cuts in 2024. This led traders to anticipate as much as 160 bps of cuts last month, but current market expectations are at 140 bps for this year.
Traders are now focused on the release of the U.S. consumer price index report on Thursday, which is expected to show a 0.2 percent rise in headline inflation for the month and a 3.2 percent increase on an annual basis. The easing of inflation is seen as a necessary condition for aggressive rate cuts, but Rob Carnell, Asia-Pacific Head of Research at ING in Singapore, believes that other factors such as falling payrolls and a substantially higher unemployment rate are also needed for an imminent rate cut. Currently, there is little evidence of these conditions.
According to the CME FedWatch tool, Fed funds futures indicate a 64 percent probability of the Fed easing in March, compared to 80 percent a week earlier.
In other currency news, the euro rose 0.16 percent to $1.0949, while the yen weakened 0.34 percent to 144.96 per dollar, inching closer to the 145 mark. The Norwegian crown also saw a rise of 0.3 percent against the euro to 11.2924 after Norway’s core inflation rate fell more than expected in December. This could potentially lead to an earlier policy easing by the central bank. The Swedish crown remained relatively unchanged against the euro at 11.1986 after retail sales in Sweden fell 0.5 percent in November.
Morgan Stanley has recommended long positions on NOK/SEK as the Norges Bank is reducing its Norwegian crown sales, while the Riksbank’s FX-hedging program is coming to an end. This absence of central bank flows suggests that NOK/SEK can trade more on fundamentals, which point to a higher NOK versus SEK.
By Ankur Banerjee and Joice Alves
