US manufacturing output exceeds expectations
The US manufacturing output data for January surpassed expectations, with the ISM Manufacturing PMI index coming in at 49.1%, higher than the forecasted 47.2%. While this reading falls short of indicating sector growth, it is the highest level since October 2022.
Fed to delay rate cuts?
The Federal Reserve decided to maintain the target range for the federal funds rate, and recent indicators suggest that economic activity in the US has been expanding at a solid pace. Job gains have moderated but remain strong, and inflation has eased over the past year but remains elevated. The rebound in the ISM manufacturing index supports the Fed’s view that it can wait before cutting interest rates.
Impact on crypto market
Cryptocurrencies are influenced by investor sentiment and rate decisions by the Fed. Lower interest rates can make government securities less attractive, increasing the appeal of assets like cryptocurrencies. While markets anticipate a rate cut, strong economic data suggests that significant reductions may not happen soon. It might take several months before rate cuts have a notable impact on high-risk speculative assets such as crypto.
Hot Take: Will Investor Sentiment Impact Crypto Markets?
The higher-than-expected US manufacturing output data raises concerns about dented investor sentiment in the future. The Federal Reserve’s decision to maintain interest rates and positive economic indicators indicate a delay in potential rate cuts. This could affect the crypto market as lower interest rates often make cryptocurrencies more appealing compared to traditional investments. However, with resilient economic data suggesting limited rate reductions, it may take time for any significant impact on high-risk speculative assets like crypto to materialize.
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