Key Economic Events This Week
This week, key economic events, including the S&P Services PMI and a Fed speech, could significantly impact the crypto market's volatility.
Several key economic events this week could significantly affect the crypto market. Traders are particularly interested in the S&P Services PMI, the US trade deficit, consumer credit data, and a speech by Richmond Fed President Tom Barkin. The relationship between crypto markets and economic events has strengthened after a period of low correlation in 2023, making these upcoming releases crucial for market participants.
In a sentiment-driven market, staying ahead of significant economic data releases is essential for traders and investors looking to adjust their strategies.
Here are the four major events that could influence the crypto market this week:
S&P Final US Services PMI: On Monday, attention will be on the S&P Global Services PMI, covering sectors like finance, insurance, real estate, and business services. In July, the PMI beat expectations, rising to 56 points, up from June’s 55.3, indicating expansion in the services sector. This growth suggests increased demand for services, a positive signal for traditional markets.
US Trade Deficit: The US trade deficit will be released on Tuesday and could impact both traditional and crypto markets. In June, the trade deficit pointed to increased services and car exports, highlighting a shift towards a service-oriented economy. According to Lumida Wealth CEO Ram Ahluwalia, this transition could lead to more investment opportunities and improved economic conditions. While the effect on crypto may be indirect, positive trends might attract investment into riskier assets like cryptocurrencies.
Positive economic data often boosts investor confidence in the crypto space. As traditional markets strengthen, investors may be more willing to take risks, leading to increased interest in cryptocurrencies.
Consumer Credit: The US Consumer Credit data for June will be released on Wednesday. This data measures the amount of credit extended to individuals and helps assess the impact of monetary policy. In May, consumer credit increased at an annual rate of 2.7%, with revolving credit rising at 6.3%. This suggests consumers are more confident and willing to borrow, which is generally positive for the economy. If June's data shows similar trends, it could stimulate economic activity and drive corporate earnings, potentially boosting stock prices. However, higher consumer credit levels carry risks of defaults and financial instability, which could increase volatility in traditional finance markets. Crypto markets might indirectly benefit from a stronger overall economy, as increased stability and consumer activity could attract investors to alternative assets like cryptocurrencies.
Richmond Fed President Tom Barkin’s Speech: On Thursday, Richmond Fed President Tom Barkin will speak about policymakers' perspectives, which may influence both traditional and crypto markets. The Federal Open Market Committee recently held interest rates steady at 5.25%–5.50% for the eighth consecutive meeting. Fed Chair Jerome Powell expressed cautious optimism about disinflation progress for the second half of 2024, without signaling an imminent rate cut. However, some, like X CEO Elon Musk, criticize the Fed's reluctance to lower rates.
Musk's comments followed a disappointing jobs report, raising concerns about an economic slowdown. Wall Street banks, including Citigroup and JPMorgan, advocate for aggressive rate cuts amid signs of a cooling labor market. Citigroup economists predict rate cuts in September, November, and December, with JPMorgan adding that there's a strong case for action before the next meeting on September 18.
Macro Data Drives Crypto Sell-Off: Meanwhile, crypto markets are experiencing volatility, with the total market capitalization dropping by 12%. Bitcoin has fallen 12.35%, trading at $53,000, while Ethereum has lost 20%. Some attribute the crash to Japan's stock market experiencing its worst losses since 1987. Market analyst Zach Jones connects the downturn to Japan defending its Yen currency and selling its US Treasury holdings. According to Jones, Japan faced a choice between allowing their currency to collapse or printing money to defend it, ultimately choosing the latter.
Elsewhere, Donald Trump, the Republican ticket nominee for the November elections, blames the recent financial market crash on the current US leadership, citing Kamala Harris and Joe Biden.
