The cryptocurrency market was on edge this week due to the release of important data from the United States. From inflation rates to retail sales, the data offered many lessons for digital asset enthusiasts. Here are the top three key lessons crypto investors should keep in mind when reading this week's economic data:
Fed cuts interest rates
Both the CPI and PPI data suggest that inflation is higher than the market had expected. The U.S. PPI inflation data was released at the same time as the weekly unemployment rate data. Wholesale inflation peaked in February, according to U.S. PPI inflation data released by the Bureau of Labor Statistics on Friday. The PPI index, which measures the price at which raw materials are sold in the market, recorded a 0.6% increase in February, compared to the 0.3% that economists had predicted. By comparison, January also saw an increase of 0.3%.
Contrary to expectations, the US annual inflation rate came in at 3.2%, beating January's figure and remaining at its highest since 2021. However, consumer prices rose 0.4% month-on-month, up slightly from 0.3%, mainly due to higher gasoline prices. The better-than-expected data points initially suggested that the Fed's rate cuts may take some time to finally take effect. But markets quickly gained confidence and started betting that a cut would come as early as June.
Unemployment is spreading downwards
This week's unemployment data has caused the cryptocurrency market to breathe a sigh of relief. Weekly data released by the U.S. Department of Labor (DOL) on Thursday showed that 209,000 new claims for unemployment insurance were filed in the week ending March 9. This follows a revised 210,000 from 217,000 last week, and beat the market consensus of 218,000. A drop in the unemployment rate usually leads to an increase in the number of day trades. With more people in stable jobs, investors' risk appetite usually increases. This in turn boosts the cryptocurrency market.
There is no buying pressure for crypto investors
Some investors believe the U.S. economy has stabilized to a level where further growth is possible with little chance of a resurgence in inflation. Slowing job and income growth are a sign of this. In such cases, the purchasing pressures that typically arise when people can't buy trickle down through the ranks.
Nausheen Toussou
Disclaimer: The presented content may contain the personal opinions of the author and are subject to market conditions. Please conduct market research before investing in cryptocurrencies. The author or publication is not responsible for any personal financial losses.
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