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What Does This Week Have in Store for Crypto?

2 mins
Updated by Geraint Price
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In Brief

  • Investors will hope that U.S. CPI data continues an overall cooling trend, contributing to Bitcoin's 70% increase so far this year.
  • International pressure and recent bank failures have seen the CME's FedWatch tool peg the likelihood of a Fed pause at 35%, a potential boon for crypto.
  • Seasonally-adjusted jobless claims for Feb. 2023 further support a pause in rate hikes.
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Crypto investors will be watching key U.S. economic data this week, including U.S. CPI, for clues on the Federal Reserve (Fed) policy decision due May 2-3.

Investors will be hoping that the U.S. Consumer Price Index (CPI), Producer Price Index (PPI), and jobless claims will build on Bitcoin’s 70% rally this year.

Analysts Predict Cooling CPI

Last month, the Federal Reserve indicated that it would consider easing monetary policy amid signs that the U.S. economy could be cooling.

Analysts from FactSet expect U.S. CPI to continue cooling. A CPI increase of 0.3% is expected when data is published on April 12

Data from February suggested that U.S. inflation was decreasing, despite core U.S. CPI, which excludes food and energy prices, reaching a five-month-high. CPI rose 0.4% last month, with the cost of shelter contributing 70%, a trend that is set to continue in March.

Last month’s Producer Price Index, a measure of wholesale inflation, decreased by 0.1%.

The Fed’s Open Markets Committee meeting minutes from March 21-22 will be released on April 13. The minutes will describe the factors leading to the increase in interest rates by 25 basis points at the March meeting. They could also offer investors an insight into the Fed’s next move.

Bitcoin is expected to show some volatility after the publication.

Astute investors will also mine the meeting of several prominent finance ministers, including those of the U.S. and Europe, for clues to the next policy decision when they meet at the April 10-16 Spring Meeting in Washington, D.C.

Eastern economies like India and China have criticized Western rate hikes, resulting in a federal funds rate of 4.75%-5%, for contributing to recent failures of U.S. banks Silicon Valley and Silvergate.

Firming of Oil Prices Tempers Job Market Optimism

Fed chairman Jerome Powell said last month that a tight labor market is putting pressure on the central bank to keep raising rates to combat inflation.

However, seasonally-adjusted job claim numbers revealed that the U.S. jobs market was looser than Powell originally indicated, removing a key driving force behind a further increase.

U.S. Jobless Claims
Seasonally-Adjusted U.S. Jobless Claims | Source: Reuters

Accordingly, CME Group’s FedWatch Tool predicts a 33.3% chance of the Fed pausing rate hikes.

However, it also suggests a 66.7% chance that the central bank will increase rates by 0.25% at its next meeting. This scenario, likely to be influenced by firming oil prices, will take the overall rate to 5%-5.25%.

CME Target Rate Probability
CME Group FedWatch Tool | Source: CME Group

The recent collapses of Silicon Valley and Silvergate Bank will likely also weigh on the next Fed meeting.

High interest rates caused the crypto-friendly banks to sell long-term Treasury instruments at steep losses to drum up liquidity to honor withdrawals.

Silicon Valley Bank called in the receivers last month. Silvergate announced its voluntary liquidation in February, after a confidence crisis sparked by the collapse of FTX in November last year.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...