Once again, this week will bring major macroeconomic data for the Bitcoin and crypto markets, which investors should pay attention to. While Bitcoin has regularly managed to break the 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 although the week started quietly, there were two macros event this week that can be significant. But first, the US stock market starts with a day off due to President’s Day, while monthly earnings continue from Tuesday to Friday.
In particular, major retailers could test the strength of the US stock market rally next week as investors look to the health of consumer spending and the impact of inflation on corporate profits. On Tuesday, Walmart and Home Depot will release their reports.
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 most recent FOMC meeting on February 1st, providing in-depth insight into the economic and financial conditions affecting the interest rate vote.
Financial investors and Bitcoin are likely to pay extra attention at this time, as last week several Fed speakers said that the rate decision was not in agreement and supported a 50 basis point increase. There was also an upward revision of the CPI and a high January report last week.
Based on this negative data, some voices suggested that the Fed could use the minutes to make some subtle corrections. The Fed Minutes could hint at an imminent rate hike and capture financial markets.
In addition, Powell stated that the minutes will provide insight into what the Fed will decide when to pause the rate hike cycle – also a very important data point for financial markets.
Additionally, the Fed may be reflecting its desire for multi-month inflation data, signaling that the Fed has reached its 2% target. Here, the focus will be on the still very tight labor market, as wage pressures do not match the 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 new decoupling of Bitcoin will likely be tested.
The second major event of the week is 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 more accurately than the Consumer Price Index (CPI).
Core means exclude food and energy prices which are more volatile and seasonal compared to PCE. Since October 28, core PCE has fallen from 5.1% to 4.4% most recently in January.
This time, it is expected to rise 0.4% in January, from 0.3% in December and 4.3% YoY. In case there is a negative surprise and the PCE comes above expectations, fears about imminent inflation are likely to become more entrenched. This could also act as a damper on Bitcoin prices as well.
At press time, the price of Bitcoin stood at $24,520 after being rejected at the crucial resistance at $25,223 once again.
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