Tech companies have been posting higher than expected earnings amid rising concerns around the financial health of the First Republic Bank. Although the huge drop in the regional bank’s stock price catapulted a Bitcoin price jump on Wednesday, the volatility remains high. Meanwhile, the U.S. Federal Reserve is set to announce its interest rate decision when the Federal Open Market Committee (FOMC) meets between May 1-2, 2023. Hence, the crypto market could remain volatile in the days to come, as the financial markets expect the central bank to finally show signs of relaxing it’s monetary policy.
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A majority of the S&P 500 companies have been beating expectations, on the back of cost cutting measures like mass layoffs. For instance, Mark Zuckerberg led Meta, which is also heavily invested in the Web 3.0 space with the Metaverse ambition, sacked 10,000 employees in 2022 besides plans to layoff another 21,000 until November 2023. This led to a rising number of high income professionals wanting unemployment benefits, which the Fed will be closely looking at.
End Of Fed Rate Hikes?
According to Fundstrat advisor opinion on Yahoo, the upcoming FOMC meet will affect the last rate hike measures due the need for easing financial conditions. The massive surge in unemployment claims from employees with above $200,000 pay could trigger what could be a ‘dovish hike’. A 25 bps hike in the May Fed meeting could be followed by easing of financial restrictions, the advisors said. Meanwhile, an overwhelming majority of respondents to the CME FedWatch Tool expect the central bank to raise interest rate by 0.25%, from the current target rate of 4.75 to 5% range.
On the other hand, the US Dollar Index (DXY) is currently at a three month low at 101.41. Hence, going by the inverse correlation between DXY and Bitcoin price, the top cryptocurrency could be on a path to further rise in the lead up to the Fed meeting, especially so if Fed Chair Jerome Powell expresses a dovish stance after a 25 bps hike.
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