This week is packed with key economic events that could significantly influence the crypto market. These macroeconomic data come as market participants prepare for the approach of the end-of-year holidays.
Meanwhile, Bitcoin (BTC) continues to hold above the $100,000 mark with traders and investors expecting further upside during the supposed Christmas rally.
US Macroeconomic Data That Could Influence Bitcoin Sentiment This Week
Crypto market participants, traders, and investors will be watching the following US economic data this week for price implications.
S&P Flash PMI data on services and manufacturing sector
The week begins with the Monday release of the S&P Flash Services and Manufacturing Purchasing Managers’ Indices (PMIs). PMI data, derived from monthly business surveys, serves as key indicators of economic health, often used to predict market trends and assess business conditions.
The Services PMI for November came in at 56.1, with the December consensus forecast slightly lower at 55.3. At the same time, the manufacturing PMI, which was 49.7 in November, is expected to decline slightly to 49.6 in December. A PMI above 50 indicates economic expansion, while an index below 50 indicates contraction.
If data shows strength in the services and manufacturing sectors, it could boost overall economic confidence. This optimism could increase investor appetite for riskier assets, including cryptocurrencies. Economists, however, remain cautious as concerns about the overall economic outlook persist.
“The American economy is currently in a mess. We have had an inverted yield curve and an ISM manufacturing PMI below 50 for almost a year now. Yield curve inversion has successfully predicted the last 7 recessions. Before COVID and the 2008 crash, the ISM manufacturing PMI was below 50,” a popular user on X shared.
Retail sales data
Another US economic data that will be of interest to crypto market participants this week is retail sales data. After the figure of 0.4% in October, economists predict a figure of 0.6% in November. Retail sales data will provide insight into consumer spending habits and overall consumer confidence.
If retail sales are strong, indicating consumers are spending more, that could be seen as a positive sign for the economy. This could lead to increased investor confidence in traditional financial markets, which could also spill over into the crypto market.
Retail sales data can also influence inflation expectations. If retail sales are strong, this could signal growing demand and potentially higher inflation in the long term. Cryptocurrencies like Bitcoin are often seen as a hedge against inflation, so any signs of rising inflation could prompt investors to turn to cryptocurrencies.
“Strong sales = bull markets, weak = risk aversion,” said popular analyst Mark Cullen.
Fed Interest Rate Decision (FOMC)
However, the highlight of this week’s US macroeconomic data will be the Federal Reserve’s (Fed) interest rate decision on Wednesday. Crypto markets are bracing for market swings as they wait for the Fed to raise or cut rates.
According to the CME FedWatch tool, markets expect a rate cut of 25 basis points (0.25% bps) on Wednesday. This contrasts with a 6.6% probability that the Fed will cut rates by 50 basis points (0.5%).
That suggests the Fed is likely to take a more cautious stance on interest rate cuts next year, as progress in reducing inflation toward the 2% target has stalled. Against this backdrop, investors will also be watching the Fed dot chart to gauge whether median interest rate projections show a more hawkish shift in the Fed’s outlook.
Shortly after the FOMC, Fed Chairman Jerome Powell will hold his press conference, marking another interesting observation for crypto market participants.
“Markets are closely monitoring any signs of future tightening or dovish comments. A surprise here could trigger significant moves across the board, especially in interest rate sensitive sectors,” remarked a popular user on X (Twitter).
The U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) released last week reinforced expectations that the Fed will slow the pace of its rate cut cycle next year . Specifically, the CPI rose again, while the core CPI refused to decline. Meanwhile, the unemployment rate is gradually increasing.
Given this situation, the FED is expected to continue reducing interest rates by an additional 0.25%. However, this position may be based on the hope that this is only a temporary situation and that inflation and the unemployment rate will continue to decline in times to come.
GDP data for the third quarter of 2024
On Thursday, the US Bureau of Economic Analysis (BEA) will release the second revision of third quarter (Q3) GDP data. This data will offer insight into the health of the economy as we approach the end of the year.
It’s worth noting that this is one of the leading indicators of the health of the US economy, with a median forecast of 2.9% following the previous 2.8%. This means that US GDP grew at an annual rate of 2.8% in the third quarter of 2024, and markets will be watching to see if this trend continues.
PCE inflation data
To close out the week, November personal consumption expenditures (PCE) inflation data will be released on Friday. It is a measure of consumer spending and includes all goods and services purchased by U.S. households. This makes it a crucial move for the Fed, meaning any surprises could have a direct impact on future Fed policy decisions and market sentiment.
According to The Kobeissi Letter, a popular commentary on global capital markets, annualized one-month PCE core inflation is now over 3.5% as traders await November data at the end of the week . Meanwhile, one-month, three-month, and six-month annualized PCE core inflation is back on the rise here.
Likewise, Supercore PCE’s one-month annualized inflation is now approaching a whopping 5%. On the other hand, overall Supercore PCE inflation is above 3.5% and starting to rise again. Taken together, this data shows that consumers are once again under pressure from high inflation across many categories.
Based on the above, it could be an eventful week, with possible increased volatility around these events. At the time of writing, BTC was trading at $104,991, up a modest 2% since Monday’s session opened.
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