Despite the confirmation of their hawkish stance in the recently published FOMC meeting minutes, the stock market and thus the crypto sector have proven to be surprisingly resilient. The stock market could thus temporarily shake off its corrective trend after a stronger-than-expected JOLTS jobs report in the middle of the week. In particular, the better-than-expected US jobs report on Friday (6 January) encouraged market participants to open new positions in the equity sector. As a result of the positive price development of stock indices in Europe and the US, Bitcoin (BTC), Ethereum (ETH) and other Altcoins also tended to be bullish and ended the trading week on Sunday with respectable price gains. For now, investors appear to be betting that the new trading year of 2023 will develop better than expected, inflation will continue to fall and the worst may be over.
These events are the focus of investors
In the coming trading week, investors will first look to Fed Chairman Jerome Powell’s press conference on Tuesday. On Thursday, investors will then focus on the publication of the consumer price index in the United States. At the end of the week on Friday, there will also be a focus on new figures from the University of Michigan on consumer confidence and consumer expectations. In addition, investors in the crypto space are looking at developments around the employee layoffs at the crypto exchange Huobi. In addition, crypto investors are monitoring the development of the insolvency problem of the loan provider Genesis and its parent company DCG. Gemini CEO Cameron Winklevoss’ ultimatum was passed yesterday, Sunday, with no response from DCG CEO Barry Silbert.
Fed Chairman Powell’s press conference in focus
Tuesday 10 January 2023: Market participants expect the chairman of the Federal Reserve Bank to provide new insights into the Federal Reserve’s monetary policy when the next interest rate decision is made on February 1. In addition, investors will likely be listening closely to see if the US central bank’s top monetary watchdog will confirm his stance from the past few months and, as seen in the so-called FOMC minutes, categorically rule out another rate cut in 2023. Any hint of a possible deviation from plan, no matter how small, should send the bulls pawing their hooves and result in higher prices. However, this is exactly what Powell wants to prevent. The Fed chief could therefore counter sharp stock market gains with further sensitive measures to reduce the money supply so as not to jeopardize the goal of a permanent end to inflation. For Powell, a recession is apparently still inevitable to bar the danger of a new flare-up of price increases in the long term.
CPI consumer prices provide new insight into developments in US inflation
Thursday 12 January 2023: At 14:30 (CET) the US Bureau of Labor Statistics publishes the latest inflation data for the month of December. Compared to the previous month of November, a small increase of 0.3 percentage points is expected for the core interest rate, which does not take energy and food prices into account, after 0.2 percent last time. In a year-on-year comparison, market experts expect a decline to 5.7 percent compared to 6.0 percent in the same period last year. If market analysts’ forecasts are confirmed and US consumer prices continue to fall as they did in December, ideally even undershooting market analysts’ expectations, the correction in the US Dollar Index (DXY) is likely to be larger. The stock and crypto market could thus continue to gain strength and, similar to December 13 of the previous year, set off price fireworks. If, on the other hand, consumer indices are higher than expected across the board, this will clearly be interpreted as bearish for the market. Fed Chairman Powell would be confirmed in a hawkish stance to keep interest rates high longer than investors are asking.
US consumer confidence and consumer expectations close the week
Friday, 13 January 2023: At 16:00 (CET), market participants look at the preliminary releases on consumer confidence and consumer expectations for private households for the current month of January. The consumer confidence published by the University of Michigan reflects the level of consumer optimism about economic development in the United States. At the final release for December, household confidence was 59.7. For the first forecast of the new year, the expert estimate of 60.0 is slightly above the final numbers for the previous month. If the first figures for consumer confidence in January are again above the assumed estimates, it will probably also be seen positively.
If private households continue to have confidence in economic developments in 2023 despite the difficult economic outlook, it suggests that consumer behavior may also stabilize in the coming months. At the same time, if the presented consumer expectations confirm this trend and are not significantly below the advance forecasts of the experts from 60, companies such as Amazon and Apple, which have been hit hard recently, are likely to benefit from an initial reaction.
As there is still a correlation between the price movements of the Nasdaq index and the crypto sector, the prices of Bitcoin, Ethereum (ETH) and Co. could also benefit from it. But if the forecasts for consumer confidence and consumer behavior are far below expectations, a divestment cannot be ruled out either. Whether the market views good economic data as negative, as in previous months, and rather bad news results in positive trading days, should be tested again with data from the University of Michigan. The statistics are currently true, according to which January represents a generally bullish trading month.
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