NewsletterBreaking: PCE Reveal Sees BTC, ETH Rally, Can The Fed “Full Send” It?
The Personal Consumption Index has just been released. It shows a -0.1% MoM change in personal consumption expenditures. The estimates expected no change in the PCE from last month. Therefore, a decrease of 0.1% in PCE is a second straight data that reveals cooling inflation. As a result, a strong crypto rally can be seen.
Bitcoin jumped to cross $21.5K while Ethereum crossed $1.66K. The entire crypto rally is now dependent upon Fed chair Jerome Powell’s speech at the Jackson Hole conference. If Powell takes a dovish stance, expect a strong bullish movement in the crypto market.
The Significance of PCE In Crypto Rally
The Personal Consumption Expenditure index is a measure of the change in prices paid for consumer goods and services. PCE mostly consists of a compilation of household expenditures.
PCE is an important measure of inflation, and will likely be factored in by the Fed in the next month’s interest rate decision.
The Federal Reserve is responsible for controlling inflation. The latest CPI data showed a YoY increase of 8.5%. While the data still shows high inflation, it also reveals that it is cooling. The crypto market saw a strong rally, expecting a dovish Fed or maybe even a pivot from Quantitative Tightening.
The PCE data may also change the minds of some of the hawkish members of the Fed. St. Louis Fed President James Bullard has supported a 75 bps hike. A traditionally dovish Minneapolis Fed President Neel Kashkari also laid down the expectation of a “Volcker-esque” stance.
This low PCE data, after an already lesser than expected CPI, may help to mild down the aggressive Fed.
Can Jerome Powell Help “Full Send” Crypto
Despite the skyrocketing crypto, many traders will still be cautious. By far, the most important event today is Fed chair Jerome Powell’s speech at the Jackson Hole conference. A cautious and dovish Fed can result in a strong bullish movement in the market.
However, an aggressive Powell could dampen down the strong surge after the PCE data.
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