Dollar's Decline Fuels Rally in Bitcoin, Equity Markets

The U.S. dollar has declined against major currencies due to a rise in U.S. unemployment claims, leading to positive impacts on Bitcoin and equity markets. The US Dollar Index (DXY) has dropped 0.45%, while the S&P 500 has traded close to its record high following the release of jobless figures, suggesting a possible correction in the dollar's strength. Additionally, Bitcoin has risen 2.5% in the past 24 hours, benefiting from the weakened dollar and the perception of slower economic growth.

Weakening Dollar Buoys Equity and Cryptocurrency Markets, Benefits Bitcoin

The United States dollar has succumbed to a downturn following the release of disappointing unemployment claims data, providing a tailwind to Bitcoin (BTC) and equating markets.

U.S. Dollar Retreat

According to TradingView data, the U.S. Dollar Index (DXY), which gauges the greenback's strength against a basket of major world currencies, witnessed a 0.45% decrease from Thursday's peak of 105.73 to 105.25.

Equity Market Resilience

In contrast, the S&P 500 traded within 1% of its record high after the publication of the U.S. unemployment figures. By Thursday's close, the Dow Jones had surged by 0.85%, the S&P 500 had gained 0.51%, and the Nasdaq Composite had risen by 0.27%.

Bitcoin Ascent

Bitcoin's value has increased by 2.5% over the past 24 hours and was trading at $62,927 at 9:06 a.m. ET, as per The Block's Price Page.

Analysts' Insights

"U.S. rates appear to have peaked on April 30, with minus 20bps for the U.S. two-year yield, to price lower growth, the DXY is down 1% and bitcoin is up 8% since then," Aurelie Barthere, Principal Research Analyst at Nansen.ai, told The Block.

ING bank FX strategist Francesco Pesole noted in a report on Friday, "the negative dollar response to a modest tick-up in U.S. jobless claims yesterday tells us that the widely overbought dollar remains quite vulnerable to even slightly softer U.S. data releases and now markets could also be buying in more convincingly on the softening U.S. jobs market narrative."

Positive Sentiment for Risk Assets

The lower DXY coincides with weaker employment data emerging from the U.S., which provides further evidence that the labor market in the U.S. is gradually cooling and could put pressure on the Federal Reserve to cut rates sooner.

The heightened anticipation of a Fed rate cut and a lower DXY could prompt investors to shift capital out of safer assets like bonds and into riskier assets like equities and cryptocurrencies like Bitcoin.

Cautionary Note

However, Barthere emphasized that any further dollar decline could also negatively impact both credit markets and risk assets. "Investor's should remain attentive to potential signs of greater growth weakness, which might not be positive for risk assets including crypto, as equities and credit are rich in terms of historical valuations and risk premia."

Slowing U.S. Jobs Narrative Gains Traction

On Thursday, the weekly jobless claims report from the U.S. Labor Department revealed that new claims for unemployment benefits rose last week to the highest level in more than eight months.

This news follows a weaker U.S. jobs report last Friday, which showed that employers added only 175,000 jobs last month, falling short of economists' expectations for a 243,000 increase.

The GM 30 Index, representing several of the top 30 cryptocurrencies, has increased by 2.53% to 131.96 over the past 24 hours.

Disclaimer

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