The US Federal Reserve (Fed) announced a further 1 basis point rate cut last month, but reduced the expectation of rate cuts in 2025. Combined with the potential tariff and tax cut policies of the newly elected US President Trump, this has raised market concerns about inflation and the prospect of Fed rate cuts, causing the US dollar to continue to rise since early last month, reaching 108.86 points yesterday (2nd), a near two-year high.
Analyst: The US Dollar Will Continue to Strengthen in the First Half of 2025
Against this background, Lee Hardman, a foreign exchange analyst at Mitsubishi UFJ Financial Group, said that due to the potential rapid implementation of tariff policies by Trump after taking office, as well as the limited prospect of Fed rate cuts, the US dollar may continue to strengthen in the first half of 2025:
As the new year begins, the US dollar has continued its upward momentum, with the market expecting Trump to quickly implement policies that are favorable to economic growth in the early part of his term.
At the same time, even Kit Juckes, the chief foreign exchange strategist at Societe Generale, who has a cautious attitude towards the continued strength of the US dollar, said:
The US dollar may face pressure, but only if US economic data unexpectedly shows that the Federal Reserve will cut rates more than once in the first half of the year, and the total rate cut for the year exceeds 50 basis points.
The possibility of this happening is not small, but the likelihood of the US economy showing cracks at the beginning of the year seems low, so I am more inclined to temporarily shelve the idea of shorting the US dollar and wait until the situation becomes clearer before making a decision.
The Probability of the Fed Keeping Interest Rates Unchanged in January Reaches 88.8%
According to the CME FedWatch tool, the market expects the probability of the Federal Reserve keeping the current interest rate unchanged at its rate meeting at the end of this month to reach 88.8%, while the probability of a further 1 basis point rate cut is only 11.2%.
However, the market believes the probability of the Fed keeping the current interest rate unchanged and choosing to cut rates by 1 basis point in March is almost equal, at 46.2% and 48.4% respectively, indicating that investors still have uncertainty about the US economy and inflation.
Analyst: The Continued Strength of the US Dollar May Not Benefit BTC
Faced with the current situation, CoinDesk analyst James Van Straten also posted yesterday (2nd) that since Trump won the US election, the US dollar index has risen by more than 3%, and it is worth noting that the BTC bull market in 2017 corresponded to a decline in the US dollar.
Given the current situation, the US dollar has not shown any signs of decline, and Trump's economic policies may continue to drive the US dollar higher, so BTC may face considerable pressure.
However, although the strength of the US dollar is seen as unfavorable for risk assets including BTC, James added that Trump has expressed support for BTC multiple times before taking office, and BTC also saw a huge rally after his victory, once approaching the $110,000 level, so the performance of BTC this year is also worth looking forward to.
