Risk Off In A Time Off Strong USD

Bitcoin, Ethereum and futures linked with the S&P 500 are currently trading weak whereas the safe haven known as the U.S dollar is rising against other international currencies.

Investors are therefore trimming their bullish exposure on risky assets, as the Federal Reserve of the United States could possibly utilize the minutes of its July meeting to counter expectations of slower rate hikes along with eventual liquidity easing.

The dilemma is whether the Fed intends to use these minutes as a communication tool to counter the view of an easing cycle beginning in 2023. The Fed usually examines market reactions following meetings and utilizes minutes to clarify misconceptions. Former Fed trader Joseph Wang tweeted that there is plenty to correct today.

Still, markets appear to have gotten ahead of themselves right now, as the central banks continuing battle against inflation will not end anytime soon, according to several Fed officials following last weeks CPI release. Interest rate hikes may thus continue into 2023, but Bitcoin on the other hand has a tendency to move in the opposite direction of the dollar index.

Nevertheless, many risk assets could experience renewed volatility if the minutes go further against the dovish expectations. According to ING analysts, further rejection of this market pricing has a high chance of helping the dollar.