Interest rates could set the direction for cryptocurrencies this week, with the Federal Reserve, Bank of England and Bank of Japan expected to hold as markets look for signs that higher energy prices have prompted further tightening.
CME’s FedWatch shows a 33% chance of a US rate hike, while prediction markets’ odds are 19%, up from almost nothing at the beginning of the month. Gregory Daco, chief economist at EY-Parthenon, said September could be the first significant test of the Federal Reserve’s stance, CBS News reported.
More immediate testing will come on Thursday, with US Q2 GDP and June Personal Consumption Expenditure (PCE) expected. Strong growth coupled with persistent inflation would reinforce expectations of higher interest rates for longer and pressure cryptocurrency prices through higher yields and a stronger dollar, while softer readings could undo that trade.
All 70 economists polled by Reuters expected the BOE to stay at 3.75%, while the BOJ was forecast to stay at 1% before raising rates again later this year.
