Dollar Rebound Puts Pressure on Gold and Bitcoin
US economic growth remains strong and significant, according to Fed Chair Kevin Warsh in his recent speech at Jackson Hole. He emphasized that inflation is above target and uncertainty surrounding energy prices is elevated, leaving little room for comfort for policymakers.
The hawkish message from the Fed chair has led to a rebound of the US dollar, with the EUR/USD falling below 1.158. The stronger dollar has also pushed up Treasury yields, making assets that tend to be negatively correlated with the dollar pull back.
Gold and Bitcoin have fallen around 3% and 2%, respectively, while most major cryptocurrencies are trading lower by 4-5%. Nvidia shares have retreated nearly 3.5% after yesterday's almost 9% rally. The Russell 2000 is also weak, falling around 1.2%.
The CME FedWatch tool shows that the probability of a 25-basis-point rate hike at the September meeting has risen to 57.5%, up from 35.4% just yesterday and 55.8% one month ago.