Key Insights
Three major US economic signals may affect Bitcoin and Ethereum prices this week.
Consumer confidence, jobless claims, and PCE inflation data are some of the most important signals for traders.
Meanwhile, the markets await clarity on possible September Fed rate cuts.
Crypto traders are watching US economic signals this week, as they could strongly affect the price action of Bitcoin and Ethereum.
The past few days have already shown how sensitive digital assets can be to economic announcements. Federal Reserve Chair Jerome Powell’s Jackson Hole speech last week triggered a rally in cryptos, with Bitcoin briefly climbing before reversing, while Ethereum outperformed.
This week, three major US economic signals are set to make a difference, including consumer confidence and sentiment, initial jobless claims and the Personal Consumption Expenditures (PCE) inflation data.
Consumer Confidence and US Consumer Sentiment
Consumer confidence and sentiment data can be some of the early warning signs of household financial health and spending power. Economists expect US Consumer Confidence to slip slightly to 96.5 from July’s 97.2 for August.
Meanwhile, the US Consumer Sentiment report, which is due Friday, is expected to stay unchanged at 58.6.
For context, a reading of 58.6 is extremely low and would mark one of the weakest consumer sentiment levels this century. These weak figures imply that consumer spending power is reduced.
This is important because consumer activity powers the US economy, and any decline tends to weigh on risk assets like cryptocurrencies.
If confidence softens further, it could increase speculation of the Federal Reserve easing. This may go a long way to support Bitcoin and other digital assets. On the other hand, stronger numbers may pull liquidity toward equities and leave less room for crypto in the short term.
Initial Jobless Claims and Labour Market Signals
Another major US signal this week is the initial jobless claims data. Labour market strength or weakness has become one of the most important factors in monetary policy expectations.
The week ending August 16 saw about 235,000 Americans file for unemployment. The following week, ending August 23, analyst predictions expect a modest drop to 230,000 claims.
While a decline would show that the labour market is resilient, the continuously rising claims show that many unemployed individuals are struggling to find new jobs.
This divergence is very important. Fewer new claims may indicate that the market is stable, and might reduce the chances of an immediate Fed rate cut.
However, higher continuing claims show that there is stress in employment, and could be a warning sign that the US economy has cracks in it.
PCE Inflation
The August Personal Consumption Expenditures (PCE) inflation report is the Federal Reserve’s preferred inflation measure. It is one of the most important metrics for determining interest rate decisions.
Economists expect headline PCE to come in at 2.6% year-on-year. Core PCE, which excludes food and energy, is expected to hit 2.9%, up from July’s 2.8%.
Higher-than-expected core PCE indicates that inflation is sticky, which could reduce the chances of aggressive Fed rate cuts in the near term.
For crypto markets, however, persistent inflation has a few implications for it. In the short run, higher inflation expectations may affect Bitcoin due to tighter liquidity conditions. However, in the long term, inflation risk tends to strengthen Bitcoin’s narrative as a hedge against financial debasement.
Despite Powell’s speech improving market sentiment last week, Bitcoin’s strength appears to have weakened.
As of the latest available data, Bitcoin currently trades around $111,304, and is down more than 2% in 24 hours. This means that it is more than $10,000 below its all-time highs.
The crypto market’s performance lately | CoinMarketCap
Ethereum is down as well, but not as much as Bitcoin has crashed. The asset now trades at around $4,600.
ETF flows show this divergence, because Bitcoin spot ETFs saw outflows of over $1.1 billion last week, while Ethereum’s spot ETF outflows were limited to around $241 million.
Traders and analysts, so far, are divided, with some predicting a year-end Bitcoin rebound to $180,000, while short-term sentiment tilted toward Ethereum’s favour.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.