First, let's talk about the election situation. I had already predicted before the holiday that the effect of the Fed's 50-basis-point rate cut would soon fade. It's been less than a month until the November 5th election day, and the election situation may come earlier. During this period, large funds often choose to hedge. Sure enough, after the National Day holiday, the market reacted in advance, dropping from the lowest 66,000 to 60,000.
If it weren't for Musk's on-site endorsement of Trump, causing Trump to surpass Harris in the Polymarket win rate, the risk aversion sentiment of large funds might be even higher, and more funds might be withdrawn from the crypto market. Currently, Trump is leading by a large margin of 53:46, which is actually a hedge against everyone's concerns about the market. This week, we need to pay attention to the FOMC minutes and the CPI data on Thursday, which should still have a huge impact on market volatility.
Market Analysis
Since the Fed announced a 50-basis-point rate cut last month, the crypto market has seen a rebound. After experiencing a decline due to geopolitical turmoil in the Middle East, Bitcoin rose back above $64,000 on Monday, reaching a high of $64,466.
However, selling pressure has emerged in recent days, and Bitcoin has repeatedly tested the $62,000 level after 12 AM on the 9th. Whether it can stand firm at this level and continue to rise remains to be seen.
Extremely important data to be released!
On October 10th and 11th, the United States will release the September Consumer Price Index (CPI) and Producer Price Index (PPI), both of which are important indicators for measuring inflation and have a direct impact on the Fed's rate cut policy.
If CPI and PPI decline, indicating a slowdown in inflation, the Fed may consider further rate cuts, which will be beneficial for stimulating economic growth.
According to market estimates, the year-over-year CPI in September may slow to 2.3%, with a monthly increase of 0.1%. However, as the September non-farm employment data exceeded expectations, market expectations for a rate cut within the year have already declined significantly.
U.S. interest rate strategy manager Ian Lyngen predicts that if inflation remains sticky and the October non-farm data is relatively strong, the Fed may pause its rate cut plan.
Is CPI likely to be positive?
Macroscopically, the non-farm data released by the U.S. last Friday was explosive, with employment numbers exceeding expectations by a large increase of 254,000, and the unemployment rate unexpectedly dropping to 4.1%. These two data points are basically a royal flush, essentially confirming the expectation of a healthy soft landing for the U.S. economy. The market immediately withdrew its expectation of a 50-basis-point rate cut in November, and most major institutions have revised their forecasts to a 25-basis-point rate cut being more reasonable. Some more aggressive ones, such as former U.S. Treasury Secretary Summers, have even started to criticize the 50-basis-point rate cut in September as a mistake. Currently, the CME's expectation of a 50-basis-point rate cut in November has dropped to 13%. However, in the context of the current rate cut cycle, this gradual pace is beneficial for the market, as it will allay investors' concerns about a recession, which is also the reason why the market has risen after the non-farm data was released.
However, those who know understand that this data is likely to be beautified for political purposes. But regardless, such high employment numbers make this Thursday's inflation data particularly crucial.
The previous CPI was 2.5%, and the market expects it to come in at 2.3%, indicating a very optimistic outlook.
The previous core CPI was 3.2%, and the market expectation is also 3.2%. Looking at this, the market is not particularly panicked about this data.
Personally, I think this CPI is likely to decline, which would be positive, as it is the last inflation data before the election. Some people will certainly try to embellish it to hype it up, so everyone can look forward to Thursday.
Don't doubt it, the crypto bull market is definitely coming, it just might be a slow bull rather than a raging bull, gradually rising as central banks around the world engage in massive easing.
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