Markets
Bitcoin (BTC) prices record highest gain in 2 months as markets anticipate ‘summer of easing’
Bitcoin (BTC) posted its biggest one-day gain in nearly two months on Wednesday, as weak U.S. economic data increases the likelihood that the Federal Reserve (Fed) will join its advanced-country peers in easing monetary policy with rate cuts over the course of summer months.
According to data sources TradingView and CoinDesk, the leading cryptocurrency by market value rose more than 7.5% to $66,250, the largest percentage increase since March 20. Like other risk assets, BTC is sensitive to expected changes in the monetary policy stance of major central banks and recovers as the cost of borrowing fiat currency is expected to decline.
Data released Wednesday by the U.S. Department of Labor shows the Consumer Price Index (CPI) increase lower than consensus estimates in April, signaling a further decline in the cost of living in the world’s largest economy. The headline CPI rose 0.3% last month after rising 0.4% in March and February. The core CPI, which excludes food and energy prices, rose 0.3% in April after rising 0.4% in March.
Other data showed that the title retail sales growth has stalled in April, sales in the “control group” category, which is included in the calculation of GDP, decreased by 0.3% over one month.
Expectations for rate cuts have therefore been significantly changed. Fed Funds Futures Expo Traders expect the Fed to make the first rate cut of 25 basis points in September. (Summer of this year is ready to start on June 20 and ends on September 22). The Fed recently indicated it would slow the pace of its quantitative tightening, also a liquidity tightening tool, starting in June.
It’s not just the Fed. Markets expect the Bank of England (BOE) and the European Central Bank (ECB) decided to cut their rates in June. THE Swiss National Bank (BNS) and Sweden Bank of Riks have already reduced their benchmark borrowing costs.
Central banks around the world are moving towards further monetary or liquidity easing, which is a positive sign for risky assets, including cryptocurrencies, as shown in the chart below from the currency tracking site. MacroMicro data.
The percentage of global central banks whose last action was a rate hike is rapidly declining, while the percentage of banks whose last action was a rate cut is increasing.
In other words, the net percentage of central bank rate cuts is increasing.
“As the proportion increases, central banks reduce rates, which could help improve market liquidity. The lower the proportion, the less liquidity there is in the market. » MacroMicro said in the explanation.
Prospects for liquidity easing over the summer should support stocks, giving investors enough confidence “to stay further out on the risk curve,” according to Pepperstone brokerage company.