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• The Federal Reserve meeting scheduled on Wednesday may be hawkish for the greenback
• Bitcoin may quit a few of its 2023 positive factors on a hawkish Fed
• All eyes are on the Fed’s view on inflation, progress, future rates of interest, and quantitative tightening

The Federal Reserve’s financial coverage determination is scheduled this week. It is the first time the FOMC (Federal Open Market Committee) meets in 2023, and the stakes are excessive for the US greenback.

Bitcoin has strengthened in opposition to the US greenback in January thus far, in sync with different fiat currencies. Therefore, no matter the Fed decides on Wednesday will have an effect on Bitcoin worth too.

A hawkish Fed may flip up being bearish for Bitcoin. These are the 4 areas the place the Fed may specific its hawkishness: inflation outlook, progress outlook, rates of interest degree, and quantitative tightening.

Inflation outlook

The Fed is dedicated to bringing inflation to its 2% goal. This is why it has raised charges so aggressively, so if the Fed says that inflation is embedded and upside dangers stay, then the US greenback ought to transfer larger.

In this state of affairs, the market will wager that the Fed sees ongoing charge hikes as acceptable.

Growth outlook

The forex stance is {that a} sustained interval of below-trend progress is probably going. If the Fed modified its view and sees recession required to have a cloth affect on the inflation outlook, that may additionally set off a pointy transfer larger in the greenback.

Interest charges

Ultimately, it’s all about the rate of interest degree. The funds charge vary has reached 4.25%-4.50%, and all eyes are on what the Fed does and says on Wednesday.

The base case state of affairs is that the Fed will hike by 25bp and says that ongoing rate of interest will increase are acceptable. Therefore, something greater than that must be bullish for the greenback and bearish for Bitcoin.

For instance, the Fed may hike 50bp. This is a danger going into the meeting, particularly contemplating that inflation just isn’t backing down as quick as initially thought.

Quantitative tightening

The Fed presently shrinks the steadiness sheet at a tempo of $95 billion/month. A call to speed up the steadiness sheet discount can be very hawkish for the greenback.