Key points:
- The Fed Sent Mixed Signals, But Ultimately a More Hawkish Tone
- This Sent Riskier Assets Including Crypto Lower Wednesday
- However, Rebounds Thursday Have Eased the Technical Damage
Mixed but ultimately hawkish signals from the Fed Meeting sent risk assets lower Wednesday including cryptocurrencies, though the crypto coins are staging a relatively firm rebound effort today.
The Fed Sent Mixed Signals, But Ultimately a More Hawkish Tone
After an as expected 75 basis point rate hike on Wednesday from the Federal Open Market Committee (FOMC), the Fed statement gave riskier assets something to cheer initially, as the wording indicated that the next rate hike, likely at the next meeting in mid-December would be less aggressive, probably just 0.50%. However, the ensuing press conference saw Fed Chairman Jerome Powell state that the final rate of interest rates “will be higher than expected.”
He added “It is too premature to think about a pause in rate hikes. We want to make sure we don't loosen our monetary policy too soon,” and that the Fed “doesn´t think they have tightened monetary policy too much“.
Also read: What Is the Crypto Fear and Greed Index?
This Sent Riskier Assets Including Crypto Lower Wednesday
This signalling that interest rates could go higher than the financial markets had previously been expecting and possibly stay at these heightened levels for longer saw a rapid shift from “risk on” after the hike and statement to “risk off” in the wake of the press conference.
US stock indices plunged lower, with the S&P 500 and Nasdaq down by over 2% and 3% respectively for the session. With the crypto market still positively correlated with risk assets, the major cryptocurrencies and altcoins were predominantly lower on Wednesday.
However, Rebounds Thursday Have Eased the Technical Damage
In the aftermath of the erratic “risk on/ risk off” session on Wednesday, most cryptocurrencies are staging modest gains at worst, and in some cases robust rebounds. This is despite the broader global equity and stock averages being unable to sustain even minor recoveries and pushing back lower again already today.
Although the main cryptocurrencies and altcoins are still mostly below Wednesday’s trading levels from pre-Fed, they are showing a relatively more resilient technical tone.
The key focus today will now be on the interest rate decision from the Bank of England at 12.00 GMT, with a 75bp rate increase expected. Then attention will turn to the US Services Purchasing Managers Index (PMI) data from the Institute of Supply Managers (ISM). Critical into the end of the week will be the US Employment report on Friday.