Dollar Soars to 13-Month High on Rate-Hike Speculation, Crypto Markets Feel the Pinch
The US dollar has reached its highest level in over a year, driven by renewed Federal Reserve rate-hike speculation and a broad selloff in tech stocks. The dollar index (DXY) climbed to a 13-month high on June 24.
Fed officials are now pricing in roughly 32% odds of a 25 basis point hike at the July 29 FOMC meeting, up from earlier expectations of potential rate cuts later this year. The catalyst behind this shift is inflation that simply won't cooperate, particularly on the energy side, with oil prices having been stubbornly elevated.
Crypto markets are feeling the pressure, with Bitcoin trading below $65,000 in mid-June and showing an inverse correlation with the DXY. This means that when the dollar strengthens, Bitcoin tends to weaken, and vice versa. Ethereum faces similar headwinds, tracking Bitcoin's macro-driven moves closely.
The July 29 FOMC meeting is now the most important date on the calendar for both traditional and crypto markets. If the Fed signals a rate hike or delivers a surprise increase, expect the dollar rally to accelerate and crypto prices to face renewed selling pressure.