Crypto market participants are eagerly awaiting the US Consumer Price Index (CPI) data, which is expected to be released on Thursday, July 11. In particular, financial markets across the board will be closely monitoring the key inflation data, as it could dictate the Federal Reserve’s upcoming stance on interest rate plans.
Here we consider Wall Street estimates and the potential impact of US CPI data on the Fed's rate cut decision.
Wall Street bets on US CPI data decline
According to market expectations, Thursday's inflation data is expected to provide some relief to financial market participants as well as the cryptocurrency market. In particular, the U.S. CPI figure is expected to show inflation settling at 3.1% in June after spiking to 3.3% the previous month.
On a month-on-month (MoM) basis, CPI inflation is expected to rise slightly by 0.1% after remaining stable in May. When it comes to core CPI inflation, Wall Street expects the MoM increase to remain stable at 2.2%. Also, US core CPI year-on-year is expected to stabilize at 3.4% in June.
The outlook for slowing inflation has the market banking on a dovish stance from the Federal Reserve, and the recent U.S. employment report appears to have bolstered market sentiment toward a possible Fed rate cut in September.
Meanwhile, according to the CME FedWatchTool, the market is expecting a possible 25bps rate cut by the US Federal Reserve in September. In addition, this week will see the release of another key inflation indicator, the US Producer Price Index, from the Department of Labor following the US Consumer Price Index. Investors will be closely watching these two inflation indicators.
An indicator that provides potential clues about future market trends.
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How will the cryptocurrency market fare?
The Fed considers the US CPI inflation data to be a key indicator of inflationary pressures in the country. That said, the inflation data will be closely watched by investors as it could signal the direction of the Fed's future interest rate plans.
While the market is betting on a possible rate cut in September, a better than expected US CPI could dampen overall market sentiment. Given that, investors need to exercise due caution before betting on the market.
Additionally, the market has been experiencing volatility recently, as evidenced by Bitcoin price and altcoin activity, with the German government’s recent Bitcoin selloff and the Mt. Gox repayment crisis weighing on market sentiment.
However, market sentiment appears to be improving recently, with robust inflows into a US spot Bitcoin ETF and hopes that a spot Ethereum ETF may soon be approved. Additionally, the recent filing of the Solana ETF in the US also suggests that Bitcoin and altcoins may soon see a rally.
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