Why the Dollar Hit a 3-Month Low and Bitcoin Only Moved 0.7%
The dollar fell to a 3-month low on Monday. Traders have stopped believing the Federal Reserve will raise rates again. Bitcoin (BTC), which normally thrives on a weak dollar, moved 0.7%.
Gold did far better. It has gained 9.3% in a month. Bitcoin has lost 0.8% over the same stretch. The same news reached both assets, and only one traded on it.
Why the Dollar Hit a 3-Month Low
The US economy stopped creating jobs in July. Payrolls fell by 23,000, the Bureau of Labor Statistics (BLS) reported.
The revisions hurt more than the headline. May and June were cut by a combined 103,000 jobs. Unemployment now sits at 4.1%.
Shoppers pulled back too. Retail sales dropped 0.6% in July to $763.6 billion, according to the Census Bureau. June had risen 0.2%.
Inflation cooled at the same time. Consumer prices rose 3.4% in the year to July. Core prices, which exclude food and energy, rose 2.5%.
Traders reached the obvious conclusion. Odds of a September hike fell to roughly 30%, down from about 75% in late July. That is the lowest reading since the Fed's June decision, Brown Brothers Harriman said.
The dollar followed. The Bloomberg Dollar Spot Index fell for a third straight session to its weakest level since May 15.
Two weeks ago, the dollar index near 100 still held firm. That floor is gone.
Gold Caught the Move. Bitcoin Did Not.
A falling dollar usually lifts scarce assets. This time it lifted one of them.
Gold climbed to $4,407 an ounce, while Bitcoin price action tells the opposite story. BTC sits at $63,572, up only 0.7%.
Trading is also thin. Bitcoin changed hands worth $12.6 billion in 24 hours. That is under 1% of its market value. Last week produced the same split. Gold outpaced Bitcoin sharply after the identical inflation report.
Why Wednesday's FOMC Minutes Decide the Next Move
Here is what the dollar trade may be missing. The Fed's July decision was not unanimous.
The vote was 9-3. Three voting members wanted a quarter-point increase, the Fed's own statement shows. Rates stayed at 3.50% to 3.75%.
The dissenters were Beth Hammack of the Cleveland Fed, Neel Kashkari of Minneapolis, and Lorie Logan of Dallas. All three vote on policy this year.
Minutes from that July 28-29 Federal Open Market Committee (FOMC) meeting arrive on Wednesday. They will reveal how close the call really was.
"We think it will be hard for the market to switch back to a fully hawkish mindset if there are a few sentences in the minutes pointing to a closer call on the unchanged rates decision than most think," Chris Turner, global head of markets at ING, told Bloomberg.
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