How Crypto Markets Will React to Big Week for US Inflation Data

Crypto markets spent the past week on a retreat, with more than $300 billion leaving the digital asset sector. Trading was uneventful over the weekend, but there was a small spike in activity and subsequent price correction on Monday morning in Asia.

In addition, several key inflation reports are due in the US this week, which could affect the central bank’s monetary policy. This will be the final set of CPI and PPI data ahead of the Federal Reserve meeting on January 29, according to Kobeissi’s letter.

Last week, the Consumer Sentiment index reflected a rise in inflation expectations that was consistent with price trends in the ISM Services PMI report. This may have affected high-risk assets such as crypto and tech stocks, which corrected sharply.

Economic events from January 13 to 17

The possible re-acceleration of inflation prompted investors and analysts to express concern that the Fed could hold off on rate cuts in the first half of the year. In addition, Fed Governor Michelle Bowman said inflation has risen “uncomfortably above” its long-term target “although stubborn upside risks remain.”

The December Producer Price Index (PPI) report is released on Tuesday, reflecting input prices for producers and manufacturers. This data measures the costs of producing consumer goods, which directly affects retail prices and is seen as a signal of inflationary pressures.

Another key inflation gauge, the December core CPI report, is due on Wednesday. The consumer price index is a measure of the average change over time in the prices paid by consumers for a basket of consumer goods and services.

“The Fed is expected to halt its cycle of rate cuts at its next meeting at the end of the month, but firmer-than-expected CPI data could push back market projections for further easing by the end of the year,” Reuters wrote on January 12.

Key events this week:

1. December PPI inflation data – Tuesday

2. December CPI inflation data – Wednesday

3. December retail sales data – Thursday

4. Philadelphia Fed manufacturing index – Thursday

5. December data on housing starts – Friday

6. Total of 7 Fed Speaker Events…

— Kobeissi Letter (@KobeissiLetter) January 12, 2025

The December retail sales report is due on Thursday. It provides information on how much money consumers spend on durable and non-durable goods and is a leading indicator of the overall health of the economy.

Earnings results from major banks such as JPMorgan and Goldman Sachs next week will kick off fourth-quarter reports for US companies.

Crypto market outlook

Total market capitalization was flat over the weekend, but fell below $3.4 trillion at the time of writing.

Bitcoin rose near $96,000 during Monday morning’s Asian trading session, but immediately pulled back below $94,000 where it has been for the past few days. The asset is still down 5% over the past week.

Ethereum mirrored the move with a peak above $3,300 only to fall back to the $3,200 level after losing 11% over the past week.

Altcoins were predominantly in the red, with the biggest daily losses for Cardano (ADA), Tron (TRX), Sui (SUI) and Stellar (XLM).

SPECIAL OFFER (Sponsored) Binance Free $600 (Exclusive to CryptoPotato): Use this link to register a new account and receive an exclusive welcome offer of $600 to Binance (full details).

LIMITED OFFER for CryptoPotato readers on Bybit – Use this link to register and open a FREE $500 position with any currency!