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US Dollar Sees Modest Rise with Higher Yields Ahead of Anticipated Spot Bitcoin ETF Approval

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Table of Contents

Exploring the Forces Behind the Dollar’s Surge, Anticipated Market Developments, and Bitcoin’s Stellar Start

  • The US dollar kicks off 2024 with a robust surge, witnessing its most significant daily gain since October, propelled by higher U.S. yields.
  • Market dynamics intensify as the benchmark 10-year yield surges, shaping investor expectations amidst a busy week of economic data releases.
  • Bitcoin makes headlines, touching a 21-month peak at $45,532, fueled by rising expectations of SEC approval for exchange-traded spot Bitcoin funds, marking a potential turning point for the cryptocurrency market.

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The US dollar initiated the new year on a robust note, experiencing a notable surge on the first trading day. This uptick, marked by a substantial daily gain in the dollar index, stands as the most significant increase since October.

The ascent of the US dollar is underpinned by higher U.S. yields. This surge according to a recent report is further fueled by the anticipation surrounding key economic events, including U.S. jobs data and European inflation numbers. Experts point to the potential impact of corporate issuance on mean reversion in yields, with a quote from a financial expert shedding light on this aspect.

In response to the dollar’s ascent, the euro experienced a decline, accentuated by Eurozone factory activity contracting for the 18th consecutive month. Other major currencies also witnessed fluctuations against the dollar. This shift in currency dynamics is indicative of broader economic trends.

Also Read: Crypto Market Rally Not Quite Given with Approval of Bitcoin ETF: Analysts

Market Dynamics and Expectations

The benchmark 10-year yield witnessed a notable increase, rising by 10 basis points, marking the most significant daily surge in over three weeks. This surge is accompanied by a busy week for investors, featuring a lineup of crucial economic data releases. The impending release of FOMC minutes and payrolls adds a layer of significance to the shaping of market expectations.

Kenneth Broux, a senior strategist at Societe Generale, provides insight into the potential impact of corporate issuance on yields. Current market expectations reflect an 82% probability of interest rate cuts by the Fed, with the CME FedWatch tool predicting a substantial easing of over 150 basis points in the coming year.

Higher oil prices, driven by concerns over potential disruptions to Middle East supply after a recent Red Sea container ship attack, are impacting the market. This has repercussions on currencies, with the dollar responding with a 0.4% climb against the Norwegian crown and a 0.2% increase against the Canadian dollar.

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Cryptocurrency Surge and SEC Approval Anticipation

Bitcoin, the flagship cryptocurrency, commenced the year with a remarkable surge, reaching a 21-month peak at $45,532. This surge is attributed to heightened expectations of the U.S. Securities and Exchange Commission (SEC) approving exchange-traded spot Bitcoin funds, signaling a positive trend in the cryptocurrency market.

The anticipation of SEC approval holds broader implications for the cryptocurrency market. Market observers are closely monitoring this development as it could mark a significant milestone, potentially shaping the future landscape of cryptocurrencies and their integration into traditional financial markets.

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