- Amid sustained volatility, the crypto market is to combat fluctuations from key events this week.
- These events include releasing US economic tools like CPI, PPI, Job data, and retail sales.
As the new week commences, crypto market participants are watching to see four key macroeconomic events in the US that could influence the industry.
As we discussed earlier, these macroeconomic events have affected the portfolios of Bitcoin (BTC) holders. Given this impact, investors may need to adjust their trading strategies ahead of this week’s data.
This week, the four major US economic events likely to shape the crypto market are CPI, PPI, initial job claims, and retail sales.
January Consumer Price Index (CPI) Report
This week’s lineup of US economic data with crypto implications begins on Wednesday with the release of the January CPI report. The CPI is a key indicator of inflation and changes in purchasing trends. A higher CPI indicates higher inflation, while a falling CPI indicates lower inflation.
The December 2024 CPI report showed that inflation increased to 2.9% Year-over-Year (YoY). At the same time, the core rate dropped to 3.2%. As CNF noted in an earlier post, the Federal Reserve (Fed) maintained its primary interest rate between 4.25% and 4.50% during its most recent meeting.
This move signaled the Fed’s cautious approach despite calls from former President Donald Trump to lower rates. The US Central Bank explained that there is a need for continuous improvement in inflation before considering rate reduction.
The Cleveland Fed’s Inflation Nowcasting model projected that the primary CPI rate will sit at 2.85%. This forecast represents a modest 0.5% drop from the 2.9% rates recorded in December. Additionally, they forecast that the core rate will drop to 3.13%.
Notably, the US CPI data usually influences risky assets like Bitcoin. High inflation would suggest a hawkish Federal Reserve stance, which could decrease Bitcoin’s price in the short term. This typically occurs as investors flock to the traditional market to protect their investments when inflation is high. On the other hand, lower inflation rates could increase demand for Bitcoin as investors seek alternative investments.
In addition to the US inflation figures, crypto market participants are keen to hear remarks from Fed Chair Jerome Powell. They anticipate his testimony would play a crucial role in deciding the direction of US interest rates.
The US Producer Price Index (PPI)
On Thursday, the Bureau of Labour Statistics will unveil the US PPI data, which offers insight into inflation at the producer level. This data can influence investor sentiment by providing early signals about future consumer prices.
The PPI data for December came in at 0.2% PPI, suggesting easing inflationary pressures. This week’s US PPI report will reveal producer-level inflation in January, with a median expectation of 0.3%.
As noted in our earlier post, a higher-than-expected US PPI report could signal rising production costs. This may ultimately result in increased consumer prices.
As a result, investors may shift their investments to Bitcoin as a hedge against inflation, driving up demand and prices. In contrast, lower-than-expected PPI figures could lead to risk-on sentiment in traditional markets, potentially reducing demand for cryptocurrencies.
Initial Jobless Claims
The US Department of Labor will also release its weekly jobless claims report on Thursday. This data will provide insight into the health of the US labor market. It shows the number of individuals who filed for unemployment insurance last week.
The previous initial jobless claims data for the week ending February 1 came in at 219,000. Lower-than-expected claims this week suggest continued job market strength, potentially suggesting steady consumer spending and a resilient economy.
Such strength, however, might prompt the Fed to consider increasing interest rates, which could boost the US dollar but weigh on Bitcoin.
Retail Sales
The fourth economic event to sway crypto prices is the US retail sales data set for release on Friday. This data provides valuable insights into consumer spending patterns, economic growth, and overall market sentiment.
If this week’s US retail sales come out better than expected, it will strengthen consumer spending and economic confidence. Crypto investors may interpret a positive financial outlook as a sign of overall market strength and stability. This will likely boost crypto adoption, potentially leading to price surges.
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