Bitcoin’s Progress Halts at $61K as European Stocks Surge and Bank of England Suggests Potential Summer Interest Rate Reduction
Despite a surge in European stock markets, Bitcoin is grappling to maintain its position above the $61,000 level. This challenge coincides with the Bank of England’s decision to keep interest rates unchanged while hinting at a possible rate cut in the summer. According to reports, both the FTSE 100 and Stoxx 600 indexes in Europe saw gains, with the FTSE 100 reaching a new record high.
Is a Rate Cut on the Horizon?
On Thursday, the Bank of England expressed confidence in the UK economy’s recovery in the first quarter, putting an end to a brief recession. The market interpreted the bank’s stance as a “dovish hold,” indicating a higher likelihood of a rate cut next month. It is expected that the Bank of England may follow the European Central Bank in implementing a rate cut in June. This suggests that a global cycle of interest rate cuts has begun.
Interestingly, the timing of the potential rate cut by the Bank of England, which has remained steady at 5.25% for the sixth consecutive time, has gained political significance ahead of the upcoming general election. Prime Minister Rishi Sunak aims to reassure voters about the UK’s economic stability amid a crisis of rising living costs.
European central banks are also contemplating reducing interest rates, anticipating lower inflation compared to the United States. Bank of England Governor Bailey clarified that the actions of the Federal Reserve will not necessarily dictate their decisions. However, the Bank of England is cautious about acting too hastily after successfully bringing down inflation from double digits to 3.2%.
While some analysts predict a rate cut, they caution that the current macroeconomic environment of prolonged higher interest rates may persist for years to come, influenced by factors such as trends following the 2008 financial crisis. Despite these developments, Bitcoin saw a slight decline of over 1% in the past 24 hours, trading at $61,411.
Pound Weakens as UK Stocks Reach Record Highs
Following Thursday’s decision, the pound depreciated against both the dollar and the euro. However, this proved beneficial for exporters and international companies listed on London’s FTSE 100 index, which reached a new high. Simultaneously, Frankfurt’s market also reached a new peak due to expectations of interest rate cuts by the European Central Bank and the Federal Reserve. Despite the positive market sentiment, a well-known international group recently forecasted that the UK’s growth would be limited to 0.4% this year due to high interest rates and ongoing inflation.