How could Powell's statements before the US interest rate announcement affect the Bitcoin and dollar markets?

This week, a critical decision by the Federal Reserve is expected. Signals given during the press conference following Chairman Jerome Powell’s Fed interest rate announcement could profoundly impact global financial markets, especially bitcoin and the dollar. The US interest rate decision is not just a numerical choice; every detail of Powell’s tone and language will influence investors’ strategies in the coming months.

According to CME FedWatch data, there is a 96% probability that the central bank will keep its policy rate steady in the 3.5%-3.75% range this Wednesday. However, the market’s main focus is on how Powell describes this pause—whether it is temporary or indicative of a longer-term stance.

Why the Fed won’t cut rates this Wednesday

After three consecutive quarters of rate cuts, the Federal Reserve has now paused. In December, Powell stated that there would be no additional cuts for the rest of 2026. This week’s US interest rate announcement is likely to confirm this stance.

Minneapolis Federal Reserve President Neel Kashkari recently emphasized that it is “too early” to cut interest rates again. Market observers suggest that if the Fed does not take a expected action, it could lead to a weakening of the dollar and gains in bitcoin and stocks.

The market will interpret Powell’s stance: Hawk or dove?

The critical question for traders is: what signals will Powell’s comments about the rate pause send regarding future policy outlook?

A hawkish scenario would involve Powell signaling concerns about inflation risks, which could put pressure on risk assets. In this case, bitcoin might come under pressure.

A dovish scenario would imply Powell suggesting that easing remains on the table and that rate cuts could resume in the coming months. Under this outlook, risk assets, especially bitcoin, could see upward pressure.

Morgan Stanley’s analysis indicates that the Fed will maintain a dovish stance by stating that “the scope and timing of additional adjustments to the target range will be evaluated.” This suggests that the possibility of easing remains open.

Fed member Stephen Miran, appointed by Trump, is expected to support a bold 50 basis point cut. If the number of dissenting votes increases, it could strengthen expectations of future easing and create a positive environment for bitcoin.

Trump’s housing policies put Powell in a tough spot

During the US interest rate announcement, Powell will also face questions about Donald Trump’s efforts to lower housing prices. Trump recently instructed his officials to purchase $200 billion worth of mortgage-backed securities. Additionally, he issued an executive order restricting large institutional investors from buying single-family homes.

According to ING Analytics, Powell’s current statement could strengthen the US dollar and potentially weaken bitcoin, which is denominated in dollars. However, observers also note that Trump’s measures could accelerate demand and increase housing inflation.

Allianz Investment Management has analyzed that the $200 billion mortgage purchase could cause price inflation, but the impact of the restrictions on institutional buying is limited.

Bitcoin and the dollar: Market impact of the US interest rate announcement

Currently, bitcoin is trading at around $88,280, down 0.79% in the last 24 hours. The crypto market will closely watch Powell’s comments.

JPMorgan estimates that the Fed will not change rates this year and may even raise them next year. In contrast, most other observers expect at least one or two rate cuts in the remainder of 2026. This divergence could increase volatility after the US interest rate announcement.

Powell’s characterization of Trump’s housing policies as inflationary in the short term could further increase market volatility. Additionally, he may need to prepare for questions related to the Department of Justice investigation into Powell.

Upcoming discussions in the coming months include Trump’s tariffs. While these tariffs are already factored into this year’s inflation expectations, higher import costs could pass through to consumers, adding further pressure and limiting the Fed’s policy options.

Other market developments

Microsoft and Meta’s recent quarterly results show no slowdown in AI spending. Microsoft emphasized that AI has become one of its core business areas. Meta plans to significantly increase capital expenditures in 2026.

Meanwhile, Pudgy Penguins is emerging as a strong brand in the NFT space. Starting with toys and retail partnerships, it has built a broad ecosystem with the PENGU token, reaching millions of wallet users in the Web3 space.