02/08 update below. This post was originally published on February 6
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02/08 update: The bitcoin price has charged higher following Federal Reserve chairman Jerome Powell’s comments yesterday, with the combined crypto market on the verge of crossing the $1.1 trillion mark—a level it hasn’t reached since August last year. Powell, speaking just days after Friday’s “extraordinarily strong” U.S. jobs report said it would probably take a “significant period of time” to fully stamp out inflation due to the red-hot labor market data but described the “disinflationary process” as having “begun” following the Fed increasing rates to levels not seen since before the 2008 global financial crisis.
“We expect that the Fed believing that ‘significant’ declines in inflation will occur this year is likely to kick start a year of important opportunities for global investors,” Nigel Green, the chief executive of financial advisory group deVere, said in emailed comments. “Powell’s comments about the disinflationary process having begun will now dominate investors’ mindsets in 2023 as they seek to create and build wealth after a difficult 2022.”
Others have warned that if inflation data doesn’t continue to trend downward, the market could see some volatility.
“Overnight the Federal Reserve chair Jerome Powell had just the soothing message the market was looking for,” Russ Mould, investment director at brokerage AJ Bell, said via email.
“Concerns that last Friday’s bumper jobs report would see the Fed react to what it perceived as an overheating labor market were eased, with Powell’s relatively relaxed response possibly reflecting the seasonal anomalies which often affect the January numbers. Whether Powell will remain so relaxed if the next set of payroll figures are similarly elevated is open to question and investors will be keeping a close eye on next week’s U.S. inflation figures for January. If there is any sign of a renewed uptick in prices, then the market would likely respond very negatively.
The bitcoin price is now hovering around $23,000 per bitcoin, up from under $17,000 at the beginning of the year. Ethereum
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Now, after last week’s red-hot U.S. jobs report sparked fears of a return of aggressive Federal Reserve interest rate hikes, Fed chair Jerome Powell is set to give a speech tomorrow in which he may deliver a shock wake-up call to bitcoin, ethereum, crypto and stock markets.
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The bitcoin price could come under pressure after concerns over aggressive Federal Reserve action in … [+]
“Bitcoin continues to lose momentum after the stronger-than-expected January jobs report forced the market to prepare for two more rate hikes,” Yuya Hasegawa, crypto market analyst at Tokyo-based Bitbank, said in emailed comments.
Friday’s non-farm payroll report showed the U.S. added just over 500,000 jobs in January, blowing an estimate of under 200,000 out of the water. Earlier in the week, Powell announced an interest rate hike of a quarter of a percent, the eighth straight increase but the smallest increase since March, and warned “the job”—of stamping out inflation—”is not fully done.”
However, Powell’s comments were taken by the market to be more on the dovish side than expected, sending bitcoin, ethereum, crypto and stocks sharply higher.
The jobs report “was an incredible surprise and it raises a lot of questions about what the Fed is going to do next,” Kristina Hooper, chief global market strategist at Invesco, told Reuters. “What I think is causing some of the volatility is markets trying to make sense of how the Fed will perceive this.”
Tomorrow, Powell will give a speech that will be closely watched for signs he’s turned hawkish in the face of a booming jobs market. On Wednesday, president of the Federal Reserve Bank of New York, John Williams, is also due to speak.
“Given last week’s failure to fully suppress the market’s optimistic rate outlook, the Fed members will likely continue to remind the market that the Federal funds rate will climb above 5% and will be kept there throughout the year,” Hasegawa added.
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Expectations the Fed could be about to pivot to a looser monetary policy has boosted the bitcoin … [+]
Though last week’s surprisingly strong jobs data sparked fears of aggressive Federal Reserve action, some think the better-than-expected numbers could be merely “seasonal noise.”
“The blowout 517,000 increase in total employment was almost certainly a function of seasonal noise and traditional churn in early year job and wage environment and exaggerates what is already a robust trend in hiring,” Joe Brusuelas, chief economist at consulting firm RSM US, said in a client note seen by Politico.