Investors will be keeping an eye on the release of inflation data and the Federal Reserve’s (Fed) latest decision on its interest rates.
While Bitcoin breached $44,000 last week, giving investors hope for a long-term rally, this week could be full of pitfalls. Two announcements from the United States could shake up financial markets with an impact on risk assets such as cryptocurrencies.
Investors will pay attention to Tuesday’s consumer price index release and the Federal Reserve’s (Fed) latest interest rate decision. The two events “should set the tone for the stock market and the economy as we approach 2024,” Bloomberg estimates.
“The US reported strong employment growth last week, suggesting that the good news the market has been waiting for is unlikely to come. The latest US CPI data will be released on Tuesday, preparing the market for rate announcements in the following days,” a note from eToro points out.
Volatility
Above all, they could cause volatility in the markets. Expected volatility for the S&P 500 this week is the highest since March, according to Bloomberg. While the Fed could leave rates unchanged, “the risk is that a robust economy will keep inflation high, pushing policymakers to consider further hikes or keep borrowing costs high longer than expected,” warns Bloomberg.
“This could weigh on interest rate-sensitive technology stocks, which generated much of the market’s gains in 2023,” the media said.
Technology stocks and cryptocurrencies are among the assets most sensitive to central bank policy, especially the US Federal Reserve (Fed). Generally speaking, since the cryptocurrency market is smaller than the Nasdaq, it is also subject to more volatility. A decline in the Nasdaq tends to lead to an even sharper decline in the cryptocurrency market. As of this Sunday, December 10, the cryptocurrency queen has lost 3.5% of its value and is trading above $42,200 this Monday.