Dollar Holds High, Bitcoin Dips as Market Awaits Inflation Data

Dollar Holds High, Bitcoin Dips as Market Awaits Inflation DataThe dollar held near six-and-a-half-month highs against major currencies on Wednesday, while Bitcoin retreated from its all-time high as the market paused the "Trump trade" ahead of the release of US inflation data later in the day.Charu Chanana, chief investment strategist at Saxo Bank, said the focus may shift back to inflation and Fed policy in the latter part of the week, but whether it will lead to a unwinding of the "Trump trade" remains to be seen

Dollar Holds High, Bitcoin Dips as Market Awaits Inflation Data

The dollar held near six-and-a-half-month highs against major currencies on Wednesday, while Bitcoin retreated from its all-time high as the market paused the "Trump trade" ahead of the release of US inflation data later in the day.

Charu Chanana, chief investment strategist at Saxo Bank, said the focus may shift back to inflation and Fed policy in the latter part of the week, but whether it will lead to a unwinding of the "Trump trade" remains to be seen. With investors having tied Trump's policies to inflation, the market could become more sensitive if the Consumer Price Index (CPI) comes in higher than expected.

Bitcoin paused its record-breaking rally, trading at $86,274 after hitting a new all-time high of $89,998 on Tuesday. Strategists at Royal Bank of Canada believe the dollar's rally is not exhausted, as even though Trump himself favors a weak dollar, most of his policy proposals support a stronger greenback.

The market is currently in a wait-and-see mode, awaiting the inflation data. If the inflation data comes in higher than expected, it could intensify market concerns over a Fed tightening of monetary policy, leading to a stronger dollar. Conversely, if the inflation data comes in lower than expected, it could ease market concerns over a Fed tightening of monetary policy, thereby supporting a weaker dollar.

Meanwhile, the dip in Bitcoin is also worth watching. While Bitcoin has recently hit historic highs, its volatility remains high. Market sentiment towards the digital currency remains divided, with some investors seeing it as a future trend while others believe it is a bubble waiting to burst.

Markets will closely watch the inflation data and the Fed's policy outlook in the coming days. These factors will determine the future trajectory of the dollar and Bitcoin and will also influence investor investment strategies.