Crypto Markets Eye Inflation Data for Potential Impacts

With the U.S. government’s partial shutdown recently ending, focus in the digital currency arena shifts to the upcoming release of the September Consumer Price Index (CPI), slated for announcement at 15:30 Turkish local time. This data release is eagerly anticipated, primarily due to its potential influence on the cryptocurrency field, primarily concerning Ethereum’s price volatility. While widespread market fluctuations are not expected to climb dramatically, any surprises in the CPI could stir notable activity.

Could Higher Inflation Propel Currency Movements?

Economists surveyed by FactSet estimate a 3.1% year-on-year growth in consumer prices for September, hitting an 18-month peak, with a predicted monthly rise of 0.4%. Meanwhile, core inflation—excluding volatile items like food and energy—should hold steady at 3.1% for the third month straight. Although it is widely anticipated that these figures won’t deter the Federal Reserve from executing a 25 basis point rate reduction soon, unexpected inflation surges might strengthen the U.S. dollar index, given ongoing calculations about a 50 basis point cut by year-end. The Fed’s insights could pivot based on this data reveal.

John Toro from Zerocap Research pointed out an alternative trajectory, emphasizing, “The absence of crucial economic signals during the government shutdown might lead to a cautious approach. Should inflation come in lower than anticipated, it might rekindle an appetite for risk, notably amidst pressures on retail sales.”

Is Increased Volatility on the Horizon for Ethereum and XRP?

Following the inflation report’s release, Deribit’s options market data suggests Ethereum might face a 2.9% swing in price volatility, with Bitcoin facing a 1.4% change. “Current market pricing indicates a potential +/- 1.4% shift for Bitcoin and around +/- 2.9% for Ethereum,” Markus Thielen of 10x Research explained to CoinDesk.

Volmex Finance’s indices share similar sentiments, where XRP‘s one-day implied volatility is marked at 91% and Solana‘s at 76%, predicting possible movements of approximately 4.7% and 4%, respectively, over a day.

Thielen added that technical analyses might point to a rebound shortly, noting, “The daily stochastic indicator for Bitcoin is not fully at the lower band of 15 yet, but there’s an upward divergence suggesting diminishing selling pressure, possibly setting the stage for a short-term rally.”

Key takeaways from these developments include:

• Expected 3.1% increase in September’s CPI could influence rate cut expectations.
• Potential strengthening of the U.S. dollar if inflation figures surpass expectations.
• Ethereum and XRP show indications of notable price volatility in the near term.
• Technical indicators hint at a potential short-term recovery in Bitcoin prices.

The market’s response to these economic indicators could dictate strategies among traders and investors, aligning their portfolios with any emerging trends from these pivotal financial metrics.