Tomorrow, Friday, Jerome Powell will give a speech at the annual meeting of central bankers in Jackson Hole, which could be of utmost importance for Bitcoin and the entire financial market. The speculation is rampant about the potential implications for monetary policy and the broader financial landscape.
Notably, the Jackson Hole symposium comes on the heels of yesterday’s historic US Bureau of Labour Statistics US job revision. US job additions were revised lower by 818,000, the largest revision since 2009. This major revision underscores a softening labor market—a crucial factor for monetary policy considerations, just as inflation rates began to show signs of abating, with the core Consumer Price Index (CPI) dropping from 3.9% in December 2023 to 3.2% in July.
Bitcoin Rull Return On Friday?
Notably, the symposium also comes shortly after the release of the Federal Open Market Committee (FOMC) minutes, which revealed a divided committee grappling with the decision of rate cuts in 2024, amidst evolving economic data. The weakening labor market coupled with subdued inflation has intensified expectations that Powell will signal a reduction in interest rates, possibly beginning as early as September.
Quinn Thompson of Lekker Capital provided a detailed assessment of the situation via X and linked the current economic indicators to a potential dovish pivot by the Fed. Thompson argued, “The facts have shifted dramatically over the course of the year, yet all I see are continued ambitions to fade a dovish Powell. 1H was the time for that but now the data is giving the Fed the green light.” He pointed out that with inflation cooling and unemployment rising—up from 3.7% in December to 4.3% today—the conditions are ripe for the Fed to ease rates.
Thompson also addressed market fears about the potential for a hawkish surprise from Powell, commenting, “Tons of ‘warning calls’ about Powell disappointing markets on Friday but I don’t get it. The Fed is not going to do 50 bps in September and the market doesn’t think so either so who cares. He already largely confirmed 25 bps at the previous FOMC.” He emphasized that the combination of weaker inflation data and ongoing labor market concerns have solidified the case for cuts, making a hawkish turn highly unlikely.
On the other hand, Mark Minervini, author of “Trade Like A Stock Market Wizard” and “Think & Trade Like a Champion”, noted, “Wall Street is betting that Friday at Jackson Hole, Powell will confirm that interest-rate cuts are coming soon. The question isn’t ‘will they or won’t they cut?’ The question is ‘how big will they cut?’ Many are expecting Powell to imply that tight monetary policy is no longer warranted.” Minervini highlighted that any deviation from this anticipated narrative could disappoint investors, suggesting that the market is primed for dovish news.
The Bitcoin market is highly sensitive to changes in US monetary policy. Interest rate cuts generally decrease the appeal of yield-bearing assets like bonds, making riskier investments like stocks and Bitcoin more attractive. Therefore, a dovish stance by Powell could lead to increased capital inflows into the markets, potentially sparking a return of the bull run for Bitcoin.
Conversely, if Powell’s tone leans towards maintaining or tightening monetary policy, this could lead to a risk-off sentiment among investors, possibly exerting downward pressure on Bitcoin prices as capital shifts towards safer, yield-bearing assets.
Therefore, the market will be watching not just Powell’s policy indications but also his tone and the specific language used in his speech. Historical precedence from Powell’s previous speeches at Jackson Hole suggests that market movements can be swift and significant, depending on the nature of his announcements.
At press time, BTC traded at $61,241.
Featured image from Shutterstock, chart from TradingView.com
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