- State Street strategists warn the US dollar could fall up to 10% if the Fed cuts rates more aggressively than the two reductions markets expect.
- A potential Fed leadership change, with Kevin Warsh as President Trump’s pick, could drive a faster pace of rate reductions.
- Analysts often cite a falling dollar as a potential catalyst for Bitcoin, though the inverse relationship is not always consistent.
- The first Fed rate cut is priced for June, with the current target rate range at 3.50%-3.75%.
Strategists at State Street, a global asset management giant, warned at a Miami conference that the US dollar’s decline could accelerate to 10% this year. They pointed to a possible Federal Reserve leadership change and more aggressive rate cuts as key catalysts for further weakness. Lee Ferridge, a strategist at the firm, Forex-news/dollar-may-fall-10-this-year-if-fed-cuts-more-than-expected-says-strategist-4449836″ rel=”noopener nofollow” target=”_blank”>said two cuts are a reasonable base case but noted, “Three is possible.”
Lower US interest rates typically reduce the appeal of dollar-denominated assets for foreign investors. Consequently, increased currency hedging by these investors could amplify selling pressure on the greenback. This potential for deeper policy easing is linked to Kevin Warsh, President Donald Trump‘s nominee to succeed Jerome Powell as Fed chair.
Markets currently align with a more cautious scenario, pricing in two rate cuts beginning in June. According to CME Group’s FedWatch Tool, investors see this as the most likely path. Two policy meetings are scheduled before that pivotal June decision.
Analysts frequently highlight an inverse relationship between the US Dollar Index and Bitcoin. A weaker dollar can boost global liquidity and push investors toward alternative assets like cryptocurrencies. This dynamic has historically supported Bitcoin prices during periods of dollar softness.
However, the relationship is not automatic, as Bitcoin’s short-term performance has not consistently tracked dollar weakness. Factors like profit-taking and broader risk sentiment can dampen the impact of currency moves. Meanwhile, the US Dollar Index recently touched a four-year low.
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