PCE Inflation Data This Friday Could Delay the Fed's Rate Cuts in September

The U.S. Federal Reserve’s preferred gauge to measure inflation personal consumption expenditures (PCE) is expected to come in slightly hot

The U.S. Federal Reserve’s preferred gauge to measure inflation is set to come in slightly elevated, according to economists. This could prompt the Federal Open Market Committee (FOMC) to reconsider its stance on starting Fed rate cuts in September.

Economists Estimate PCE Inflation at 2.6%, Core PCE at 2.7%

The U.S. Bureau of Economic Analysis will release the PCE inflation data for July on Friday, August 30. According to economists, the annual PCE is expected to come in at 2.6%, higher than 2.5% last month. On a monthly basis, the PCE is expected to rise 0.2%, compared to 0.1% in the previous month.

They expect the annual core PCE, which excludes food and energy prices, to rise 0.18% on a monthly basis and 2.7% on an annual basis. The estimates are slightly higher than June’s PCE numbers, but markets are still anticipating a cooling trend in inflation.

“We’re going to see continued progress on inflation,” said José Torres, senior economist at Interactive Brokers, as reported by Morningstar. He attributed this to the decline in prices for goods, including crude oil and gasoline. However, traders are keeping an eye on soaring prices for crude oil, natural gas, and gold.

If the PCE inflation comes in higher, it could put pressure on Bitcoin and Ethereum prices, potentially triggering a broader liquidation in the crypto market.

Will Fed Start Rate Cuts in September?

The European Central Bank (ECB) is also expected to provide further cues for traders, as it considers another rate cut on September 12, ahead of the Fed's meeting on September 18.

ECB policymakers have indicated the likelihood of a rate cut, while traders will be closely monitoring the inflation figures for France, Italy, and the broader Eurozone, scheduled for release this Friday.

The Fed anticipates three rate cuts this year, with a potential starting point in September, as signaled by Fed Chair Jerome Powell recently. However, the Fed may opt to delay rate cuts to November if the PCE inflation and jobs data come in significantly higher.

Meanwhile, both the stock and crypto markets are experiencing volatility, with traders reacting to Nvidia earnings and the upcoming PCE inflation data.

Despite beating revenue and earnings expectations, Nvidia shares fell about 7% in extended trading on Thursday. This occurred after the firm's sales outlook for the current quarter failed to impress investors.

According to CME FedWatch, the probability of a 25 bps rate cut in September is currently priced at 65.5%. The data still shows a total of 100 bps rate cuts this year.

The Buffett Indicator (Total US Market Value/GDP) is a ballpark measure of how expensive stocks are at any one point in history…

It’s now sitting at ~200%.

“If the ratio approaches 200%, as it did in 1999, you are playing with fire.” – W. Buffett pic.twitter.com/WD18O7SoMb

— Geiger Capital (@Geiger_Capital) August 28, 2024

Bitcoin and Ethereum Price Under Pressure

After dropping to a 24-hour low of 58,637, BTC price has recovered slightly, currently trading at $60,142. The price experienced a breakout in the lower time frame.

The trading volume has decreased by 23% in the last 24 hours, indicating a declining interest among traders.

CryptoQuant metric shows that the NVT Golden Cross for Bitcoin is struggling to surpass its previous peak, indicating a loss of momentum in the current uptrend. For the NVT Golden Cross to regain upside momentum, it needs to cross the previous peak with support from the bulls.

Moreover, a large amount of Bitcoin options, valued at $3.65 billion, and Ethereum options, valued at $1.35 billion, are set to expire on Deribit, the largest crypto derivatives exchange. This could lead to further long liquidations in BTC and ETH, potentially triggering a market correction amid the US PCE inflation data.

Meanwhile, ETH price also rose 2% from the 24-hour low of 2,510 in the past 24 hours, currently trading at $2,570. Ethereum also saw a breakout in 1-hr timeframe. The trading volume has decreased by 25% in the last 24 hours.

In the daily timeframe, Ethereum price is facing strong resistance currently. RSI is at 41 in the neutral area. Fib replacement shows that the price bounced off the 0.236 level at $2,450. During the ETH options expiry, the price may drop again to the level

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