In the last week’s trading, the buyer side once again made efforts to stabilize the market. However, neither the global equity markets nor the crypto market were able to sustainably break away from their lows of the previous week. Only in the middle of the week did stronger-than-expected home sales in the US and rising consumer confidence among US consumers ensure a temporary upswing to the north. At the same time, an emergency intervention by the Bank of England (BOE) in the currency and bond markets led to a bullish turn in the British pound (GBP), which had previously fallen to a new record low. As a result, the British national currency strengthened by 8 percentage points against the US dollar. However, given the BOE’s wobbly course, it is doubtful that this trend will continue. At the end of the week, the US dollar index DXY was just over 2 percentage points lower in a weekly comparison. Despite the short-term weakness in the US dollar, the stock market corrected steadily to low levels for the year in the second half of the week, also due to rising consumer prices in Europe and the US.
Bitcoin price is showing relative strength
In the crypto market, however, the breath of the US dollar caused a slight stabilization of the price of Bitcoin (BTC) and Co. Thus, the key cryptocurrency decoupled at least slightly from the US stock markets, which formed new lows at the end of the week. At the close of trading on Friday, the last trading day of the third quarter, the Bitcoin price also began to undergo a small price correction. However, the lower edge of the US$18,200 trading range was not restarted – a positive indication. In particular, falling UK government bond yields prevented an immediate collapse of UK bond funds in the previous week. Experts spoke of a last-second intervention in the open heart of bond and currency markets to avert turmoil similar to the US bank’s so-called “Lehman crash” in 2008. The relative weakness of the US dollar index in the last week’s trade may continue at the start of the week and cause prices in the crypto market to rise.
The relatively small decline in the price of the key cryptocurrency Bitcoin (BTC) compared to the significant price corrections in the US stock indices in recent weeks underpins the trend of relative outperformance. Whether crypto prices will be able to build on the strength of the previous week this week, despite massive currency swings and possible new annual lows in the US indices, depends in the short term on the following economic data and dates.
Cool closed meeting
This Monday, October 3, investors will initially look at the ISM Manufacturing Purchasing Managers’ Index (PMI) for the United States at 16:00. A value of 52.2 is expected for the manufacturing sector in September. In previous months, the data set by the Institute for Supply Management in the United States had stabilized at 52.8. If the numbers can surprise and prove stronger than expected, it should further strengthen the US dollar and put the Bitcoin price under pressure again.
At 17:30 (CET), market participants will look at the closed-door board meeting of the US central bank, which was scheduled at short notice. The public will find out what topics will be discussed in detail in a statement from the press office after this extraordinary meeting of the US central banks. The recent upheavals in the foreign exchange market and the countermeasures taken by foreign central banks should certainly be discussed. The Euro-dollar market, which is so important, is also in danger of drying up if the US currency’s strength continues unabated. The consequences would be a transition to a renewed easing of monetary policy, which is not currently planned by the Fed. An immediate reversal in monetary policy would underpin central banks’ helplessness and further erode the credibility of the main central bank. As a result, the inflation problem is likely to get even worse.
News from the ECB
The current JOLTS jobs report will be released by the Bureau of Labor Statistics tomorrow, October 4th at 16:00 (CET). The experts’ forecast is 10.65 million vacancies. In the previous accounting period, the number of vacancies was 11.23 million. If the number of vacancies falls more than expected, it indicates a continuing economic slowdown. The deterioration in the labor market further increases the likelihood of a deeper downturn in the US. Continued negative developments in the labor market in the coming months will be taken into account by the US Federal Reserve when it makes its final interest rate decisions this calendar year.
From 17.00 (CET) investors hope to see new information about the ECB’s monetary policy from ECB chief Ms. Lagarde. Europe’s top monetary watchdog is likely to give his latest assessments of the current interventions by various central banks in the currency and bond markets. The central banks must deal with the systemic risks of increasing distortions and formulate countermeasures. In light of rising sovereign debt and the associated medium-term dangers, such as national bankruptcies, prudent central bank policy is more important than ever. Further distortions in the bond market and drastic currency devaluations must be avoided.
New figures on the state of the US service sector
On Wednesday, October 5, investors will watch the release of the ISM Services Purchasing Managers’ Index (PMI) for the United States. At 16:00 (CET) the Institute for Supply Management will present the latest figures for the non-manufacturing sector in September. The experts’ current forecast is 56.0. In the previous month, the index was still at 56.9. Falling PMI figures are usually negative for the US dollar. A falling PMI can therefore have a supportive effect on Bitcoin and Co.
ECB meeting minutes Thursday
In the second half of the week, the European Central Bank will publish the minutes of the latest interest rate decision on Thursday 6 October at 13.30 (CET). Investors are hoping for further relevant information on the economic situation and the ECB’s future monetary policy to better assess the next interest rate adjustment at the end of October. Increased volatility in the Euro-Dollar currency pair is to be expected, which should also affect the Bitcoin price.
Employment report at the end of the week
On the last day of the first trading week, October 7, at 14:30 (CET), the latest non-farm payrolls for the US for the month of September will be presented. The data on the so-called Nonfarm Payrolls describe the monthly change in the number of employees minus the number of employees in agriculture. The monthly labor market report is one of the most important and meaningful US economic indicators. Increasing job growth is considered an indication of an improvement in the labor market and the associated increase in consumption. If, on the other hand, job growth corrects, it is an important indication of increasing problems in the labor market.
On the other hand, declining job growth has a negative impact on future consumption and further exacerbates the economic slowdown. The forecast for September is 275,000 employees. Compared to the previous month (308,000), forecasts are still declining, as was the case recently. Weak NFP figures may reinforce the US dollar correction, which should have a stabilizing effect on the Bitcoin price. Also at 14.30 (CET) the unemployment rate in the US will be published. Adjusted for the unemployment figures, which recently increased by 0.2 percent, the forecast now reads 3.7 percent. If the unemployment rate continues to rise as it did in the previous month, the deterioration of the labor market forecast from Fed Chairman Powell is confirmed due to the significant increase in the key interest rates to 3.25 percentage points.
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