- Warsh’s Jackson Hole speech puts the dollar, Treasury yields, and Bitcoin in focus.
- A hawkish stance will lift the dollar and yields while putting pressure on crypto.
- Traders are watching for clues on inflation, rate hikes, and the Fed’s next policy move.
Federal Reserve Chair Kevin Warsh will give his first Jackson Hole speech on Friday, which will have a big impact on the U.S. dollar, Treasury yields, Bitcoin, and other cryptocurrencies.
Warsh will speak at 10 a.m. ET (2 p.m. GMT) at the Federal Reserve’s annual meeting in Wyoming. This year’s theme is “Financial Innovation: Implications for Payments and Policy.”
The speech comes at an important time for markets. U.S. inflation is still high, long-term Treasury yields are rising, and the Treasury plans to at least double its weekly purchases of existing government debt starting September 9.
Hawkish Warsh to Boost the Dollar and Hurt Crypto
Meanwhile, the main question is whether Kevin Warsh will suggest that the Fed will raise interest rates again if inflation stays high.
Bank of America strategist Mark Cabana expects Warsh to keep the door open to higher rates. This will push Treasury yields higher and strengthen the U.S. dollar.
A stronger dollar puts pressure on Bitcoin and other cryptocurrencies. It will also hurt the euro against the dollar, pushing EUR/USD lower.
Forex.com’s Matt Weller said traders should watch EUR/USD and the gap between German and U.S. two-year bond yields. He sees 1.1710 as an important level for EUR/USD, while a more hawkish Warsh may push it toward 1.1570.
Before the speech, the dollar was already near a one-week high, with the DXY around 99.13 and EUR/USD near $1.1652.
What It Means for Bitcoin and Crypto
The Fed’s interest-rate decisions are set to also affect crypto. Bitcoin is trading around $80,000 at press time, up nearly 2% in the past 24 hours and about 9% over the past week.
The rally was also supported by nine straight days of money flowing into U.S. spot Bitcoin ETFs, totaling about $3 billion.
If Warsh takes a tougher stance on inflation, Bitcoin and other risky assets will face short-term pressure. Higher Treasury yields and a stronger dollar make risky investments like crypto less attractive.
Bitcoin is nearing the $81,000–$82,000 resistance area. A hawkish speech may push Bitcoin lower from these levels, while a softer Fed message helps it break higher.
If Warsh sounds more dovish, the dollar and Treasury yields will fall, creating a better environment for Bitcoin, Ethereum, and other cryptocurrencies.
The Biggest Risk
Warsh does not have to sound clearly hawkish or dovish to move markets. One criticism of Warsh is that he rarely gives clear guidance on what the Fed plans to do next. Instead, he prefers to let markets react to economic data.
Forex.com’s Matt Weller also does not expect Warsh to clearly signal what the Fed will do with interest rates in September. Traders will instead focus on his views on monetary policy and the Treasury’s recent actions in the bond market.
If Warsh avoids talking about inflation and interest rates and focuses instead on topics like productivity, demographics, and financial innovation, investors may interpret his speech as less hawkish.
That could send long-term Treasury yields higher as investors conclude that Warsh has not provided enough clarity or reassurance.
Three Possible Market Scenarios
Hawkish Warsh:
If Warsh says inflation is still too high and another rate hike is possible, U.S. yields and the dollar will rise. EUR/USD will move toward 1.1570, while Bitcoin will face selling pressure near the $81,000–$82,000 resistance zone.
Dovish Warsh:
If Warsh focuses on slower growth and structural changes without signaling higher rates, Treasury yields and the dollar will fall. EUR/USD will gain, while Bitcoin will have room to break above $82,000.
Neutral Warsh:
If Warsh avoids giving clear guidance on interest rates, market volatility will increase. Traders will react to his comments as they try to determine what they mean for currencies, bonds, and crypto.
Ultimately, traders will be watching what Warsh says about inflation, interest rates, Treasury yields, and the Fed’s future policy.
Related: BOJ September Rate Hike: What Happens to BTC, ETH and XRP if the Yen Strengthens?
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