Bitcoin is currently rebounding to the $98,000 level, and whether it can regain the $100,000 mark is closely watched. The CPI data to be released by the US at 9:30 pm tonight can affect whether the Federal Reserve (Fed) will cut rates again by the end of this year or in January next year. BlockTempo reminds you of the potentially increased volatility risk.
Core indicator of rate cut expectations: CPI data
The market currently estimates that the year-on-year CPI growth rate in the US in November will be 2.7%, slightly higher than 2.6% in October. If the latest data can prove that inflation is further easing, it will enhance the market's confidence in the Fed's rate cuts.
According to Morgan Stanley's analysis, the Fed may cut rates by 0.25 percentage points in December and January next year, respectively.
In addition, the federal funds futures market has been active recently, with trading volumes in the January and February contracts hitting new highs, also indicating that investors' expectations for rate cuts have risen significantly. Currently, the market estimates that the probability of the Fed cutting rates by 0.2 percentage points in December has reached 80%, significantly higher than the 64% last month.
Rate cut of one code rises to 86.1%
According to the CME's FedWatch tool, the market's forecast probability of the Fed cutting rates by one code in December has now risen to 86.1%, while the probability of suspending the rate cut is only 13.9%. Against the backdrop of imminent policy decisions by central banks in many countries around the world, market volatility risks are increasing, and investors need to closely monitor the relevant developments.
Prepare for the opportunity of rate cuts in advance
Morgan Stanley strategist Matthew Hornbach even suggests that investors can prepare in advance, especially focusing on the Federal Open Market Committee (FOMC) meeting on December 18. He recommends buying the February federal funds futures contract or using an overnight index swap (OIS) rate strategy related to the January meeting.
In addition, the unexpectedly weak employment data last week has further boosted market expectations for a rate cut in December. Financial market analyst Kyle Rodda said:
"If the CPI data tonight performs in line with market expectations, it will give the green light for the Fed to cut rates, and it could even become a new catalyst for the gold market."
Next week, focus on the dynamics of the US and Japanese central banks
In addition, next week will be a super central bank week, with major central banks including the US, UK and Japan holding policy meetings in quick succession, with the decisions of the US Federal Reserve and the Bank of Japan being the most closely watched.
Currently, the US benchmark interest rate is 4.75%, Japan's is 0.25%, and the UK's is 4.75%. If the US cuts rates and Japan decides to raise rates the next day, it could trigger volatility in international markets, reviving the yen carry trade unwind seen in August. Users should pay attention to the risks.
Yuichi Kodama, an economist at Meiji Yasuda Research Institute, pointed out:
"The probability of the Bank of Japan raising rates in December has exceeded 50%, but the yen's appreciation may delay the rate hike to January next year."
