Big day for Bitcoin as investors watch ECB and US GDP figures

The Bitcoin price has woken up from its snow-white slumber for the past two days. As NewsBTC reported, the price rally started shortly after the Dollar Index (DXY) showed weakness and suffered a sharp setback.

For much of 2022, Bitcoin and the dollar index were inversely correlated. While the DXY rose inexorably and all fiat currencies around the world weakened, the USD gained tremendous strength.

However, this trend was also extremely negative for the Bitcoin price, as a strong USD meant a weak Bitcoin. The inverse correlation was seen again on Tuesday.

A longer period of weakness for the DXY could thus mean further momentum for the bitcoin market, which has a short-term bullish bias. In this regard, today (Thursday) is an important day for the Bitcoin market, as both the European Central Bank (ECB) will report on its future policy and the US GDP figures will be released.

Bitcoin price at the navel of central banks

Within the DXY, the dollar is currently near a more than one-month low against a basket of currencies in which the euro has a 57.6% weighting. The decline comes after speculation increased that the US central bank will switch to less aggressive interest rate increases to mitigate recession risks.

Rodrigo Catril, senior currency strategist at National Australia Bank, told Reuters that fundamentally there are factors still favoring the US dollar: interest rate differentials and the fact that the Fed still has more work to do. But in the short term, his expectations are different:

But certainly in the short term, given how much was priced (in), we’ve seen a bit of a pullback in the dollar. […] Our view is that it is a bit of a consolidation of recent moves rather than an extension of further dollar declines.

Today’s GDP numbers may encourage the FED to stick with its current policies and not hit the brakes just yet.

Therefore, whether the Bitcoin price can continue to rise will also depend on today’s release of gross domestic product (GDP) figures in the United States. The Federal Reserve (FED) will keep a close eye on these numbers.

Analysts expect the US economy to have grown by 2.4% in the third quarter. This may signal to the FED that interest rate increases do not have too much of a negative impact on the economy at the moment.

As for the ECB, Catril commented that what the ECB says today will be important. “The question is whether they want to show the full commitment to the inflation mandate, or whether they are showing weakness or concerns about what appears to be a challenging growth outlook.”

Ahead of today’s announcements, the Bitcoin price is in a wait-and-see mode as it shows a small correction after the recent peak.