US CPI Data on Tuesday To Influence Crypto Market Movement This Week

This week, the United States is set to unveil significant inflation metrics, encompassing February’s unadjusted core CPI annual rate, February PPI annual rate, one-year inflation rate expectations, and more. According to CME, the likelihood of the FOMC maintaining unchanged interest rates on March 20 stands at a remarkable 97%.

Crypto Market Rally Pauses Before US CPI Data Release

After a strong rally last week, the broader cryptocurrency market is taking a pause at this time. The top two cryptocurrencies – Bitcoin and Ethereum – have retraced from their respective highs of $70,000 and $4,000 respectively. A similar pullback is visible across other altcoins that rallied strongly last week.

Tuesday’s release of the US CPI (consumer price index) data will take center stage in this week’s economic reports. Projections suggest the core prices index may rise by 0.3% in February compared to the previous month and by 3.7% year-over-year, marking the smallest annual increase since April 2021.

A further easing in US prices would reinforce the prevailing disinflation narrative, despite a reduction in the expected number of Federal Reserve rate cuts for the year. Swaps pricing indicates an anticipation of three cuts in 2024, down from six at the beginning of the year.

Last week’s US jobs data failed to alter this outlook significantly. Despite exceeding estimates in terms of new job additions, the jobless rate reached a two-year high. This mixed signal suggests a gradual cooling of the labor market, which, for the time being, aligns with expectations for a soft landing in the US economy.

Chris Larkin, a strategist at E*Trade from Morgan Stanley, remarked, “The jobs report didn’t necessarily signal an ‘all-clear’ for the Fed, but it also didn’t contain anything that would disrupt its plan to reduce rates.”

Crypto Entering Major Consolidation?

According to insights provided by on-chain data provider Santiment, Bitcoin and Ethereum demonstrated significant gains last week, outpacing the returns of the S&P 500. Bitcoin saw an increase of 10.0%, while Ethereum surged by 14.7%, in contrast to the modest 0.5% return of the S&P 500 index.

Historically, cryptocurrency markets have exhibited sustained bull markets with minimal correlation to traditional equities. Traders are closely observing this trend, expressing optimism for its continuation. The divergence in performance between cryptocurrencies and traditional markets underscores the unique dynamics influencing digital asset valuations, fueling hopes for continued market resilience and growth.