Fed pause shifts focus toward dollar and crypto

The US Federal Reserve held interest rates steady at 3.5% to 3.75%, but a weakening dollar is fuelling debate over whether financial conditions are easing anyway, with implications for Bitcoin and crypto markets.

The Federal Open Market Committee voted to pause rate cuts for the first time since July, with two officials dissenting in favour of a further 25-basis-point reduction as inflation was described as “somewhat elevated”.

The decision puts the Fed at odds with President Donald Trump, who has repeatedly pushed for aggressive cuts, although analysts say market forces may be delivering looser conditions through a falling dollar.

The US dollar has slid to four-year lows after its worst annual performance since 2017, prompting Trump to say, “The value of the dollar is great,” while commentators argue the administration is tolerating weakness to boost exports.

“President Trump may effectively be cutting rates on the Fed’s behalf by letting the dollar slide,”

Said David Ingles, chief markets editor at Bloomberg TV APAC.

Bitcoin and the broader crypto market have remained volatile as investors assess whether dollar weakness, rather than rate cuts, will be the key catalyst after October’s sharp liquidation.

Analysts point to an inverse relationship between Bitcoin and the US Dollar Index, with Global Macro Investor’s Julien Bittel previously calling a strong dollar a “wrecking ball” for risk assets.

Markets are now pricing the probability of rate cuts at below 50% for the Fed’s next two meetings as policymakers continue to watch inflation and stronger-than-expected US economic growth.

At the time of reporting, Bitcoin price was $87,876.91.