Bitcoin gains alongside equities as markets respond to ECB rate cut, US jobless claims
Quick Take
- The price of bitcoin has gained alongside equity indices as wider markets responded to a rate cut by the European Central Bank.
- The bitcoin price held above the $71,000 mark in Thursday’s trading.
The European Central Bank (ECB) cut interest rates as expected on Thursday. The decision was followed by an uptick in both global equity indices and bitcoin, further bolstered later on by higher-than-expected U.S. jobless claims.
The European monetary policymakers' move lowers the ECB’s key rate to 3.75%, down from a record high of 4%, where it has been since September 2023. It's the first time the ECB has cut rates since 2019.
"Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady," the ECB Governing Council said in a statement.
Equity indices respond to ECB rate cut
Major European and UK equity indices were green on Thursday. In London, the FTSE 100 posted a 28.45-point increase to 8,275.40 in mid-day trading. The regional Stoxx 600 index traded up in Europe, gaining 0.59% on the day to 524.32. Meanwhile, in New York, the Dow Jones Industrial Average was up 0.19%, the S&P 500 increased 0.055%, and the NYSE Composite gained by 0.16% in pre-market trading.
Bitcoin moved along with buoyant equity markets in Thursday's trading. The world's largest digital asset by market cap increased by around 1% in the past day and was changing hands for $71,065 at 10:38 a.m. ET., according to The Block's Price Pages.
According to Bloomberg, the short-term 30-day correlation between bitcoin and the Nasdaq 100 Index of U.S. technology stocks is around the highest since early 2023, suggesting that further gains by equities could be accompanied by a move higher by bitcoin.
Canada first G7 country to cut rates in current cycle
The move by the ECB to cut rates comes after the Bank of Canada (BoC) lowered its policy rate to 4.75% on Wednesday, having held it at 5% since July last year.
"Governing council decided monetary policy no longer needs to be as restrictive. We’ve come a long way in the fight against inflation. And our confidence that inflation will continue to move closer to the 2% target has increased over recent months," BoC governor Tiff Macklem said.
Canada was the first G7 country to loosen monetary policy in the current cycle, now followed by the ECB on Thursday.
US jobless claims edge higher
New claims for unemployment benefits in the U.S. increased last week, higher than the expectation of economists.
"In the week ending June 1, the advance figure for seasonally adjusted initial claims was 229,000, an increase of 8,000 from the previous week's revised level," the U.S. Department of Labor said.
The jobless claims report is a critical data point for the U.S. Federal Reserve as it considers whether to start cutting interest rates this year. The higher-than-expected numbers could indicate signs of stress in the labor market. That could add pressure on the Federal Reserve not to maintain its higher-for-longer rate policy.
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