Investors have been feeling risk averse this week amid ongoing concerns over the Federal Reserve. U.S. stock indexes such as the Dow Jones, S&P 500, and Nasdaq 100 have plummeted, while Bitcoin and Ethereum have remained flat. The U.S. Dollar Index (DXY) has surged above $105 amid ongoing turmoil in the bond market.
US PCE inflation data released
U.S. stocks and cryptocurrencies were reeling after the Conference Bureau released a strong consumer confidence index, which showed consumer confidence soaring to 102 in May from 96 in April, marking the first monthly increase since February.
High consumer confidence is a good sign since consumers make up the largest portion of GDP, and while it can mean the economy is doing well, it can also be a sign that inflation will remain high for an extended period of time.
The report means the Fed could keep interest rates higher for longer. Goldman Sachs' David Solomon and JPMorgan's Jamie Dimon both predicted in statements that the Fed may not cut rates after all.
But other economic indicators suggest the economy is slowing, complicating the picture: The economy grew 1.3% in the first quarter, below the 1.6% forecast earlier, and down sharply from 3.4% in the fourth quarter, according to the Bureau of Economic Analysis.
Consumer spending increased 2.0% in the first quarter, below the median estimate of a 2.5% increase, and corporate profits fell 1.7%. Overall, these figures mean that the economy has entered a period of stagflation, characterized by high inflation and slowing GDP growth.
The next big data point to watch is the personal consumption expenditures (PCE) report, which economists surveyed by Reuters expect will show headline PCE at 2.7% and core PCE at 2.8%.
The PCE report is often considered a better alternative than the more general Consumer Price Index (CPI) because it examines price fluctuations in urban and rural areas.
Cryptocurrency prices diverge
Cryptocurrencies were volatile ahead of the PCE report. The ORDI token surged more than 15% to hit its highest price since April 23. Bitcoin Ordinal has risen more than 56% from its low this year despite a drop in demand.
As the Monero bull run accelerated, the Arweave token surged to $44.2, its highest since May 23. The XMR token surged to $146, its highest since March 16, surging more than 38% from its monthly low. Other tokens that rose ahead of the PCE report were Jasmy, Notcoin, Ethena, and Lido DAO.
Meanwhile, the biggest laggards ahead of the report were meme coins such as Floki, dogwifhat, Bonk and Book of Meme. These tokens plummeted as investors took profits. If the U.S. releases a strong inflation report, the selloff in these tokens could accelerate.
