Cryptocurrency investors experienced a positive day as Bitcoin reclaimed the $40,400 support level. This comes just before a critical week with a Federal Reserve meeting on the horizon, where the Fed’s tone could be influenced by the recently released key data indicating the progress in the battle against inflation.
The Personal Consumption Expenditures (PCE) data, closely monitored by the US Fed as an inflation indicator, has been released. The Fed, which has rapidly raised interest rates to unprecedented levels to meet their 2% inflation target, caused numerous bank failures and significant volatility in risk markets. However, the rate hikes reached a peak last year, with reductions anticipated this year.
The Fed’s projected interest rate cuts for this year are around 75 basis points (bps), according to member average opinions. Nonetheless, market optimism persists for a more aggressive cut between 150-160 bps, which could influence the positive trend in risk markets, although any negative developments could drag down Bitcoin and other cryptocurrencies.
The PCE inflation data is thus crucial. The monthly expectation was 3%, with the previous annual core PCE at 3.2%. The actual figures came in at 0.2% for the monthly core PCE (matching expectations and up from the previous 0.1%) and 2.9% for the annual core PCE (slightly below the 3% expectation but down from 3.2%), which is generally positive for risk markets.
Upcoming statements by Fed Chairman Powell next week are highly anticipated, with significant interest rate cut expectations remaining unchanged following the recent data release.