Crypto markets enter the week with the near-term direction tied to whether easing U.S. inflation can keep the Federal Reserve’s interest-rate policy on hold and take pressure off the dollar into year-end. The Consumer Price Index (CPI) data due Wednesday is the first test, but the larger question is whether weaker labor demand is beginning to outweigh price pressures still above the central bank’s target.
ING strategists Chris Turner and Francesco Pesole expect a no-increase outcome for inflation to create a more supportive cross-asset backdrop. If they are right on the Fed, the dollar should be due a benign decline into year-end in what should be a risk-positive climate, according to their report. A hotter CPI print would challenge this path and put Treasury yields and the dollar back at the centre of crypto trading.
Geopolitical instability is expected to maintain a key role in market volatility, with war in the Middle East threatening vital oil passageways. Inflation pressures could also increase and with it interest-rate-hike expectations.
Written by Oliver Grant
Markets Desk
