Next Week’s Macro Crypto Catalyst: Crypto Market Focus Shifts To CPI And FOMC Meeting

Next Week’s Macro Crypto Catalyst: Crypto Market Focus Shifts To CPI And FOMC Meeting

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The crypto market is preparing for a big week ahead as all eyes are now on the upcoming CPI news. Bitcoin’s recent surge from $27,000 to over $43,000, initially due to anticipation of the U.S. ETF approvals, seems also influenced by falling interest rates in major bond markets, hinting at a potential shift in central banks’ policies towards ending rate hikes and easing monetary measures.

Crypto Market Prepares For A Volatile Week

Next week is anticipated to be quite volatile for crypto investors, who are preparing for two major economic events that are still to happen in 2023.

The focus of the economic agenda is on Tuesday’s release of the U.S. consumer price inflation report for November. Predictions suggest that this report will indicate a continued deceleration in the annual CPI.

In addition, Wednesday marks the Federal Reserve’s final meeting of the year, where it will declare its rate decision. The consensus among investors is that the central bank will likely maintain the status quo, as there is a general belief that the Fed has concluded its monetary tightening measures.

Given these factors, the upcoming week is expected to bring about significant fluctuations for Bitcoin, with effects that could be felt for several months.

US CPI Report: 12 December

Next week’s U.S. CPI inflation data is gaining importance, especially since investors are increasingly anticipating a rate cut from the Fed in March.

According to forecasts, the consumer price index is expected to show a slight increase of 0.1% for the month, following a stagnant figure in October. The projected annual inflation rate is anticipated to be around 3.1%, a slight decrease from the 3.2% rate reported in the previous month.

If the inflation data reveals a rate of 3% or lower, which would be cooler than expected, it would likely fuel further hope for a rate cut. Conversely, if the inflation rate unexpectedly surges, it could compel the Fed to continue its efforts in combating inflation.

If the CPI data shows inflation at 3% or lower, signaling that inflation is slowing more than anticipated, it could boost expectations for a rate cut. This scenario may lead to a rise in the crypto market, as investors might pursue higher returns in riskier assets like cryptocurrencies.

FOMC Meeting: 13 December

In its December meeting, the FOMC is likely to keep rates unchanged at 5.25-5.50%. Despite previous indications of possible further tightening, market consensus now leans towards the end of rate hikes.

Attention is shifting towards when the Fed might start cutting rates, with some expecting a cut as early as May 2024, although the Fed may be cautious in signaling such moves due to ongoing inflation concerns. The focus at the December meeting will be on any hints of future rate cuts, as inflation is still expected to remain above the 2% target until at least 2025.

This might have no impact on the crypto market. However, any hint on rate cuts could lead to a more dovish monetary policy outlook. Lower interest rates generally reduce the appeal of yield-bearing assets, making riskier investments like cryptocurrencies more demanding.

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