Crypto Market Takes a Pause Before US CPI Data Release 📊
After a strong rally last week, the broader cryptocurrency market is currently experiencing a pause. Both Bitcoin and Ethereum, the top two cryptocurrencies, have retraced from their recent highs of $70,000 and $4,000 respectively. This pullback is also evident in other altcoins that saw significant gains last week.
All Eyes on US CPI Data Release
This week, the release of the US CPI (consumer price index) data is taking center stage in economic reports. Projections suggest that the core prices index may rise by 0.3% in February compared to the previous month and by 3.7% year-over-year. However, this would still mark the smallest annual increase since April 2021.
A further easing in US prices would reinforce the prevailing disinflation narrative, despite a reduction in the expected number of Federal Reserve rate cuts for the year. Swaps pricing indicates an anticipation of three cuts in 2024, down from six at the beginning of the year.
Last week’s US jobs data did not significantly alter this outlook. Although new job additions exceeded estimates, the jobless rate reached a two-year high. This mixed signal suggests a gradual cooling of the labor market, which aligns with expectations for a soft landing in the US economy.
Chris Larkin, a strategist at E*Trade from Morgan Stanley, remarked, “The jobs report didn’t necessarily signal an ‘all-clear’ for the Fed, but it also didn’t contain anything that would disrupt its plan to reduce rates.”
Crypto Entering Major Consolidation?
Insights provided by on-chain data provider Santiment show that Bitcoin and Ethereum had significant gains last week, outperforming the S&P 500. Bitcoin saw a 10.0% increase, while Ethereum surged by 14.7%, compared to the modest 0.5% return of the S&P 500 index.
Historically, cryptocurrency markets have demonstrated sustained bull markets with minimal correlation to traditional equities. Traders are closely observing this trend and expressing optimism for its continuation. The divergence in performance between cryptocurrencies and traditional markets highlights the unique dynamics influencing digital asset valuations, fueling hopes for continued market resilience and growth.
🔍 What to Expect from the US CPI Data Release
This week, the United States is set to unveil significant inflation metrics, encompassing February’s unadjusted core CPI annual rate, February PPI annual rate, one-year inflation rate expectations, and more. According to CME, the likelihood of the FOMC maintaining unchanged interest rates on March 20 stands at a remarkable 97%.
The release of the US CPI data is highly anticipated and will provide insights into the current state of inflation in the country. Here’s what you can expect:
1. Core Prices Index Rise
- Projections suggest that the core prices index may rise by 0.3% in February compared to the previous month.
- This increase indicates a potential uptick in consumer prices.
2. Smallest Annual Increase Since April 2021
- The year-over-year core prices index is expected to show a 3.7% increase in February.
- While this is still a significant rise, it would mark the smallest annual increase since April 2021.
3. Reinforcing Disinflation Narrative
- A further easing in US prices would reinforce the prevailing disinflation narrative.
- This suggests that inflationary pressures may be subsiding.
4. Reduced Expectations for Federal Reserve Rate Cuts
- Despite the potential easing in prices, the expected number of Federal Reserve rate cuts for the year has decreased.
- Swaps pricing indicates an anticipation of three cuts in 2024, down from six at the beginning of the year.
5. Gradual Cooling of the Labor Market
- Last week’s US jobs data indicated a gradual cooling of the labor market.
- The jobless rate reached a two-year high, suggesting a slowdown in job creation.
Overall, the US CPI data release will provide valuable insights into inflation trends and their impact on the economy. It will be closely watched by investors and analysts as they assess the future trajectory of interest rates and economic growth.
🔥 Hot Take: Crypto Market Pauses as US CPI Data Looms
The broader cryptocurrency market is currently taking a pause after a strong rally last week. Both Bitcoin and Ethereum have retraced from their recent highs, while other altcoins also experience a pullback. This temporary consolidation comes ahead of the highly anticipated release of the US CPI data, which will provide crucial insights into inflation trends and their implications for monetary policy.
Traders are closely monitoring this pause in the crypto market and waiting for further clarity on inflation expectations. The performance divergence between cryptocurrencies and traditional markets underscores the unique dynamics influencing digital asset valuations. As investors await the US CPI data release, they are hopeful for continued resilience and growth in the crypto market.
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