Tight monetary policy was the main reason for the sales experienced last year. As interest rates increased, investors turned to less risky assets, leading to losses in the crypto and stock markets.
The Fed raised interest rates to control inflation. Recent headline and core inflation data have been quite positive. However, to understand the situation in the Fed’s fight against inflation, it is necessary to closely monitor Personal Consumption Expenditures (PCE) data. The Fed attaches importance to these data as an inflation indicator, and the expected data has just been released.
While the markets are expected to revive with lower-than-expected data, the opposite scenario is expected to lead to a decline. Additionally, lower-than-expected data can contribute to the rise of gold and the weakening of the dollar. For the withdrawal of future interest rate cuts and an increase in the amount of cuts for the next year, a continuous decline is also required in PCE data.
Today’s data is as follows: Annual PCE 3% (Expectation: 3%), Monthly PCE 0% (Expectation: 0.1%), and Core PCE Annual 3.5% (Expectation: 3.5%). Additionally, US Unemployment Claims data was released. Expectation was 218K, while the previous month was announced as 209K, and now the data came in at 218K. All these data show that the Fed is progressing as desired, which is quite positive for cryptocurrencies.
Macro trends heavily influence crypto markets.