Dollar Hovers Near Three-Week High as Fed Rate Cut Looms; Bitcoin Hits New Record

The U.S. dollar held close to a three-week peak against major currencies on Monday, as investors braced for a slew of central bank decisions expected this week. Markets are all but certain that the Federal Reserve will cut interest rates by 25 basis points on Wednesday, while also signaling a slower

After delivering an anticipated quarter-point reduction this week, the U.S. currency strength comes amid shifting expectations that Fed policymakers will forgo a cut in January. Investors see the central bank remaining cautious due to persistent inflationary pressures running above its 2% target, even though officials emphasize the recent upticks are part of a bumpy but steady disinflationary path.

Meanwhile, the incoming Trump administration—set to take office in January—could introduce policies that may fuel inflation. Despite this backdrop, Fed Chair Jerome Powell is expected to base this week’s decision and guidance on current conditions rather than anticipated policies.

The U.S. economy has proven resilient in the face of high interest rates,” said James Kniveton, senior FX dealer at Convera. “But with potential inflationary risks ahead, the Fed will need to stay vigilant. Although future U.S. policy changes may loom, I suspect Powell will avoid any hard assumptions at this stage.

By mid-morning in Europe, the U.S. dollar index =USD, which measures the greenback against six major peers, held steady at 106.83 after climbing to 107.18 on Friday—its highest since Nov. 26. The euro EUR=EBS edged 0.13% higher to $1.0517, recovering from a dip to $1.0453 last week following a surprise downgrade of France’s credit rating by Moody’s.

Data released Monday showed that the decline in euro zone business activity eased this month, offering modest support for the single currency. Sterling GBP=D3 firmed by 0.33% to $1.2650, pulling away from its Friday low of $1.2607 as investors await the Bank of England’s policy decision on Thursday. This comes just after the British economy posted a surprising contraction on Friday, underscoring the BoE’s delicate balancing act.

The yen JPY=EBS struggled to regain ground after logging its largest weekly decline since September. Reports that the Bank of Japan may skip a rate hike on Thursday weighed on the Japanese currency, with the dollar trading as high as 153.91 yen—its strongest in three weeks—before easing to 153.69.

Bitcoin Soars to Uncharted Territory

Amid the central bank watch, Bitcoin BTC stole the spotlight, racing above $105,000 for the first time before settling around $104,503 in early European trade. Enthusiasm for the world’s largest cryptocurrency surged after President-elect Donald Trump, in a recent interview with CNBC, suggested he might move forward with plans for a U.S. “bitcoin strategic reserve.”

Having pledged to make the United States “the crypto capital of the planet” during his campaign, Trump’s comments appear to have provided a fresh catalyst to Bitcoin’s rally.

“We’re in blue sky territory here, and the next figure the market will be looking for is $110,000,” said Tony Sycamore, an analyst at IG. “This is a big psychological milestone, and so long as sentiment remains positive, the momentum should keep building.”

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