Markets
Bitcoin (BTC) Price Could Follow Inflation Data This Week
Bitcoin (BTC) managed a modest rally over the past 72 hours after a dismal close last week, but three major economic reports later this week are among the factors that will likely trigger more volatility.
At press time, according to CoinDesk data, the world’s largest cryptocurrency was trading at $62,700, up 2% in the past 24 hours, and 4% from the low on Friday. The largest CoinDesk 20 Index was up 1.25% in the last 24 hours.
As spot purchases of Bitcoin ETFs slow to a halt and even turn net negative on some days, macroeconomic catalysts have taken on greater importance of late. This was evident Friday morning in the United States, when an unexpected rise in consumer inflation expectations combined with hawkish remarks from Dallas Fed President Lori Logan sent bitcoin drops to $3,000 within minutes of the $63,300 level.
The next negative or positive catalysts will likely come from the US inflation reports, namely the Producer Price Index (PPI) scheduled for release on Tuesday at 8:30 a.m. ET and the Price Index at consumption (CPI) 24 hours later.
Of the two, the CPI report is more important and economists predict that this indicator will have increased by 0.4% in April, in line with March’s advance. The annual pace of the overall CPI is expected to slow to 3.4% from 3.5% in March. The so-called core CPI – which excludes food and energy costs – is expected to rise 0.3% in April from 0.4% in March, with the annual pace falling to 3.6% from 3.8%. .
It is stubbornly high inflation that has undermined market expectations for a series of rate cuts from the Federal Reserve in 2024. To date, there have been no rate cuts and markets are now pricing in 11 % chance that the Fed will stand idly by. the rest of the year, according to CME FedWatch. Another report of rapid inflation could not only cause traders to abandon hope for looser monetary policy in 2024, but could also prompt them to assess the likelihood that the Fed’s next move will be a rate increase reference.
Wednesday will also feature the U.S. government’s retail sales report for April, which should not be overlooked as an important data point. Along with high inflation, the U.S. economy has shown no signs that it needs a rate cut. Although there has been a slight slowdown of late, employment gains continue to impress each month and retail sales figures show healthy consumer spending.
Economists forecast retail sales growth of 0.4% in April compared to 0.7% in March. Excluding automobiles and gasoline, retail sales in April are expected to increase only 0.1% compared to 1.0% in March.
Investors will also have the opportunity to hear from Fed Chairman Jerome Powell, who is scheduled to participate in a moderated discussion with Dutch central bank Governor Klaas Knot at the annual general meeting on Tuesday at 10 a.m. ET. of the Foreign Bankers Association in Amsterdam. Powell rejected in early May the idea that the US economy was at risk of falling into “stagflation” – a term made famous in the 1970s that refers to slow or negative economic growth combined with rapid inflation.
“I don’t see stagnation or inflation,” Powell said at a May 1 news conference. Market participants may want to tune in on Tuesday to see if recent data changes their minds.