Once again, this week will bring major macroeconomic data for the Bitcoin and crypto markets, which investors should pay attention to. While Bitcoin has steadily managed to break correlation with the S&P 500 and the Dollar Index (DXY) in recent weeks, it is likely that the Federal Reserve’s monetary policy will continue to have a strong impact on crypto.
And even though the week is off to a quiet start, there are two macro events this week that could be significant. First, however, the U.S. stock market begins with a day off due to Presidents’ Day, while quarterly earnings continue Tuesday through Friday.
In particular, major retailers could test the strength of the U.S. stock market rally in the week ahead as investors get a glimpse into the health of consumer spending and the impact of inflation on corporate profits. On Tuesday, Walmart and Home Depot will release their report.
A Damper On The Bitcoin Rally?
But on Wednesday, January 22 at 2:00 pm EST comes the first key event, the FOMC Minutes. This is a detailed report on the FOMC’s most recent meeting on February 1, offering in-depth insights into the economic and financial conditions that influenced the interest rate vote.
Financial and Bitcoin investors are likely to pay extra close attention this time around, as last week several Fed speakers said the rate decision was not unanimous and they supported a 50 basis point increase. There were also elevated CPI revisions and a high January report last week.
Based on this negative data, some voices suggest that the Fed could use the minutes to make some sneaky corrections. The Fed Minutes could hint at an imminent steep rate hike and tank the financial markets.
In addition, Powell indicated that the minutes will provide insight into what the Fed will decide when to pause its rate hike cycle – also an extremely important data point for financial markets.
Moreover, the Fed is likely to reflect its desire for multi-month inflation data, which signals that the Fed is well on its way to reaching its 2% target. Here, the focus will be on the still extremely tight labor market, as wage pressures are not compatible with a 2% inflation rate.
Bitcoin investors should therefore watch the FOMC Minutes closely to see if the Fed doubles down on its hawkish stance. If so, the recent decoupling of Bitcoin is likely to be put to the test.
The second major event of the week follows on Friday, February 24, when the core PCE price index is released. The PCE price index is the Federal Reserve’s preferred measure of inflation because it reflects consumer spending habits in a more timely manner than the Consumer Price Index (CPI).
Core means that it excludes the more volatile and seasonal food and energy prices compared to the PCE. Since October 28, Core PCE has fallen from 5.1% to 4.4% year-over-year most recently in January.
This time, it is expected to have risen 0.4% in January, up from 0.3% in December and 4.3% YoY. In case there is a negative surprise and the PCE comes in above expectations, fears about sticky inflation are likely to become more entrenched. This could also be a damper on the Bitcoin price as well.
At press time, the Bitcoin price stood at $24,520 after being rejected at the crucial resistance at $25,223 once again.
Featured image from iStock, Chart from TradingView.com