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Global financial markets are entering a data-heavy week that could reshape the Fed rate expectation driving both cryptocurrency and equity pricing.
Investors are watching a series of U.S. economic releases including inflation, consumer spending, Federal Reserve minutes and labor data to gauge whether interest rates will remain elevated or move toward cuts in coming months.
The evolving Fed rate expectation comes after mixed inflation signals last week and renewed geopolitical tensions, creating heightened uncertainty across asset classes.
January’s Consumer Price Index (CPI) showed headline inflation at 2.38% year-on-year and core CPI at 2.5%, according to U.S. government data.
The figures marked the lowest core reading since early 2021 and initially lifted stocks and digital assets. However, crypto gains faded over the weekend as traders recalibrated their Fed rate expectation ahead of further data.
U.S. markets are closed Monday for the Presidents’ Day holiday, but the economic calendar accelerates quickly thereafter.
The CPI report offered tentative relief to investors betting on eventual rate cuts. Still, analysts caution that one month of softer inflation may not significantly alter the Fed rate expectation without confirmation from other measures.
The Federal Reserve has repeatedly emphasized its commitment to price stability.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” — Federal Open Market Committee statement, Federal Reserve.
Attention now turns to the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge.
Economists at Goldman Sachs reportedly raised their January core PCE forecast to 0.40% month-over-month following the CPI release, citing stronger electronics and IT pricing components that carry greater weight in PCE calculations.
If confirmed, that reading could complicate the current Fed rate expectation narrative.
Rising technology component prices have been linked to global shortages in RAM and storage components, fueled in part by artificial intelligence data center demand.
These supply-driven price pressures could influence how policymakers interpret inflation persistence.
Beyond inflation, investors will parse Tuesday’s ADP employment update and January Retail Sales report, both critical inputs for assessing consumer strength.
Wednesday brings December Durable Goods Orders, the release of Federal Reserve meeting minutes, and remarks from multiple central bank officials.
The minutes will be scrutinized for clues about internal debate over rate timing. In its most recent communications, the Fed has maintained a cautious stance on easing.
Market pricing compiled by the CME Group FedWatch Tool indicates roughly a 90% probability that rates will remain unchanged at the March meeting, underscoring the prevailing Fed rate expectation of policy stability in the near term.
Consumer spending data later in the week will further test the Fed rate expectation. Strong retail sales could signal resilient demand, potentially delaying rate cuts, while weaker numbers might revive easing bets.
Cryptocurrency markets have shown sensitivity to changes in the Fed rate expectation, often mirroring risk sentiment in equities.
Total crypto market capitalization declined over the past 24 hours, with Bitcoin retreating from recent highs during early Asian trading and remaining rangebound for about ten days.
Ethereum has recorded sharper losses, while several alternative tokens have continued to trend lower.
Higher interest rates typically strengthen the U.S. dollar and tighten liquidity conditions, factors that can weigh on speculative assets.
Conversely, expectations of rate cuts have historically supported crypto rallies by improving liquidity and risk appetite.
Market commentary from The Kobeissi Letter noted that geopolitical tensions and macroeconomic uncertainty remain elevated, warning that volatility could persist as traders reassess the Fed rate expectation throughout the week.
For crypto investors and equity traders alike, the convergence of CPI, PCE, employment, spending data and Fed communications makes this one of the most consequential macro weeks of the quarter.
Each release has the potential to recalibrate the prevailing Fed rate expectation, influencing capital flows across digital and traditional markets.
Whether inflation proves sustainably contained or reaccelerates will determine if policymakers stay on hold longer than anticipated.
Until clearer signals emerge, the Fed rate expectation is likely to remain the central driver of market direction and volatility in the days ahead.
