Macro Crypto Catalysts Next Week: Crypto Market Focus Shifts to CPI and FOMC Meetings

Cryptocurrency markets are gearing up for a big week ahead as all eyes are on the upcoming CPI news. Bitcoin’s recent surge from $27,000 to over $43,000 on expectations of the approval of a U.S. ETF appears to have also been influenced by falling interest rates in major bond markets, as central banks’ policies to end interest rate hikes and ease monetary measures This suggests that there is a possibility of a change in direction.

Cryptocurrency markets prepare for a volatile week

The next week is expected to be quite volatile for cryptocurrency investors as they prepare for two major economic events still to occur in 2023.

The focus of the economic agenda is on the November U.S. consumer price inflation report, due out on Tuesday. According to forecasts, the report is expected to indicate a continued deceleration in annual CPI.

Additionally, Wednesday marks the last meeting of the year when the Federal Reserve will announce its interest rate decision. Investors agree that the central bank is likely to maintain the status quo, as there is a general belief that the Fed has finished tightening its monetary policy.

Given these factors, the upcoming week is expected to bring significant volatility to Bitcoin, the impact of which could be felt for months.

US CPI Report: December 12

Next week’s U.S. CPI inflation data is gaining importance, especially as investors increasingly look forward to a Federal Reserve interest rate cut in March.

According to the forecast, consumer prices were expected to rise slightly by 0.1% following stagnation in October. The annual expected inflation rate is expected to be around 3.1%, slightly lower than the 3.2% announced the previous month.

Hopes for a rate cut are likely to grow further if inflation data shows interest rates below 3%, which are lower than expected. Conversely, an unexpected spike in the inflation rate may require the Federal Reserve to continue its efforts to combat inflation.

If the CPI indicator shows inflation below 3%, signaling that inflation is slowing down more than expected, expectations for an interest rate cut may increase. This scenario could lead to a rise in the cryptocurrency market as investors may seek higher returns from riskier assets such as cryptocurrencies.

FOMC Meeting: December 13

The FOMC is likely to keep interest rates unchanged at 5.25-5.50% at its December meeting. Despite previous indications that further tightening was likely, the market consensus now leans toward an end to rate hikes.

Interest is focused on when the Federal Reserve will begin cutting interest rates, with some predicting a cut as early as May 2024, but the Fed may be cautious about signaling such a move due to ongoing inflation concerns. The December meeting will focus on hints of future interest rate cuts as inflation is expected to remain above the 2% target until at least 2025.

This may not have any effect on the cryptocurrency market. However, any hint of a rate cut could lead to a more dovish monetary policy outlook. Low interest rates generally reduce the attractiveness of yielding assets, making risky investments like cryptocurrencies more challenging.