In his recent statement, Federal Reserve Chair Jerome Powell mentioned the possibility of additional interest rate hikes later this year to curb inflation.
Despite undergoing a series of 10 consecutive interest rate hikes, the June National Employment Report by ADP revealed the addition of 497,000 new jobs, nearly double the earlier expectations. This indicates a robust recovery in the US labor market, even in the presence of higher interest rates.
According to the survey, over 92% believe that the Fed is likely to increase interest rates by an additional 0.25% on July 26. As a result, the sentiment of keeping interest rates unchanged has faded. This change in sentiment has led to slight declines in both cryptocurrencies and stocks.
The concern about the interest rate hike may continue to exert selling pressure, making it difficult for the prices of cryptocurrencies and stocks to recover throughout the month of July.
The Fed’s balance sheet hit its lowest level since August 2021 this week, decreasing by $667 billion from its peak in April 2022.
The banking crisis wave in March resulted in a slight increase in the balance sheet, but the tightening process has continued since then and is likely to persist until the end of 2023.
Stock and cryptocurrency investors, in general, need to prepare themselves mentally for a scenario similar to Q1/2023 potentially returning. This could involve a rise in the US Dollar Index (DXY) and a significant decline in the prices of Gold, Cryptocurrencies, and Stocks.