Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.
Events:
- 6PM UK Time: Interest Rate Decision, Summary of Economic Projections & Dot Plot
- 6:30PM UK Time: FED Press Conference
Context going into it
At 6PM UK time, the market will be focused on the Summary of Economic Projections and the updated Dot Plot. The FED won't increase or decrease interest rates today.In the SEP, the markets will be looking to see if the FED expect growth to slow, and how sticky they might see inflation being going forward. Alongside this, the market will look to see if the FED adjust their Dot Plot, which last time showed 2 interest rate cuts for 2025.
There's a combination of outputs that are possible here. If the FED sees inflation being stickier, that'll make it more difficult to cut and the market might sell down on that. If the focus is on growth, and the FED see inflation coming down over time, then that'll open the door to maybe more than 2 interest rate cuts in 2025.
30 minutes later, FED Chair Powell will speak and be questioned by journalists. Again the markets will focus on his responses to see if there is a tilt towards more cuts or not.
Our expectation
Powell and the FED are likely to maintain a cautious stance, sticking with two cuts for 2025 and signalling no urgency to ease policy in the immediate term.If this is the case, the result of this will likely be that equities and Crypto sell off whilst Bonds catch a bid (Yields down). However, this will likely increase the odds that the FED need to cut more than twice later in the year. So, short-term pain (for risk assets) for longer-term gain i.e. 2-4 cuts in the back half of 2025.
Potential Bitcoin moves:
- A dovish FED could see BTC head into the $86,300 to $89,000 area.
- A hawkish FED could see BTC retest it's $77,000 lows.
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