ECB raises rates as Fed hike fears rattle crypto, stocks

The European Central Bank raised interest rates by 25 basis points on Thursday, lifting its deposit facility rate to 2.50% and triggering a sell-off across risk assets, including Ethereum ↘ 0.02%, which dropped nearly 4% in the preceding 24 hours. The move, widely anticipated by markets, comes as traders increasingly price in a similar hike from the Federal Reserve at its September 16 meeting, compounding pressure on crypto and equities alike.fxempire

Dual Tightening Squeeze

The ECB's decision, its second rate increase since June, was driven by persistent inflation fueled by rising oil prices amid the ongoing conflict involving Iran. "The outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth," the ECB's Governing Council said in a statement. All 65 economists in a Reuters poll published last week had predicted the hike.CNBC+3

Attention now shifts to Fed Chair Kevin Warsh and the Federal Open Market Committee meeting on September 15-16. The CME Group's ↘ 0.46% FedWatch Tool showed hike odds surging to roughly 61% as of September 8, up from 44% a month earlier. Prediction market platform Polymarket placed the probability of a Fed rate hike in 2026 at 74.5%. Warsh's comments at Jackson Hole on August 28, where he stated inflation must return to 2% "at sufficient speed," have been a primary catalyst for the shift in expectations.theglobeandmail+1

The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite have gained 11% to 14% this year, but analysts warn the AI-fueled rally could stall if borrowing costs continue to rise, increasing the expense of financing data center expansion.theglobeandmail

ETH Technical Picture Holds — For Now

Despite the pullback, Ethereum's bull flag pattern on the daily chart remains intact as long as the token holds above the $2,350 support level, according to FX Empire analyst Alejandro Arrieche. On-chain metrics, including rising trading volumes and an MVRV Ratio approaching a buy signal, suggest the mid-term outlook remains constructive. If $2,350 breaks, the next line of defense would be the 200-day exponential moving average.fxempire

The Crypto Fear and Greed Index fell to 68, nearing neutral territory from recent highs. Whether this proves to be a "sell the news" dip or the start of a deeper correction may depend on what Warsh and the FOMC decide next week.fxempire