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- 1 A recent report stated that the stock market is poised for significant events that could reverberate through the financial landscape.
- 2 The factors affecting equities and the stock market could make an impact inevitably into the broader cryptocurrency market.
In the intricate dance of financial markets, inflation rates, and Federal Reserve interest rates hold pivotal roles, influencing broader economic dynamics. The cryptocurrency market, aligning with traditional counterparts, stands at the precipice of repercussions stemming from the November inflation rates and future interest rate hikes.
A recent Bloomberg report indicates that the stock market, a barometer for Wall Street sentiments, is poised for significant events that could reverberate through the financial landscape.
Traders brace for heightened market turbulence as the economic landscape endeavors to decipher the economic outlook heading into 2024. An indicator of anticipated volatility is currently marking its highest level since March, injecting an additional layer of uncertainty into market dynamics.
While the central bank is expected to maintain current interest rates, deviating from the unprecedented series of rate hikes initiated since March 2022, retail investors respond with palpable activity.
The previous week witnessed a substantial influx of $6.8 billion into the U.S. stock market, marking the most significant inflow since the aforementioned March period, according to Bloomberg’s report. These factors cast their shadows on equities and the stock market. Besides, the impact will inevitably ripple into the broader cryptocurrency market.
As a result, the crypto market could witness increased volatility in the coming weeks. This potential shift from the recent rally it has enjoyed.
Following the recent surge, the broader cryptocurrency market saw Bitcoin (BTC) surpassing $44,000, while Ethereum (ETH) breached the $2,200 mark. These upward movements triggered a rally across major altcoins, driving them to chase new recent highs.
Federal Reserve Grapples with Strong Labor Market
Traders are navigating the delicate balance between a robust U.S. labor market and persistent inflation concerns, speculating on the Federal Reserve’s response. Despite a stronger-than-expected addition of 199,000 workers to payrolls in November – surpassing economists’ forecasts – and an unexpected drop in the unemployment rate to 3.7%, expectations lean towards the Fed initiating a series of interest-rate cuts in 2024.
U.S. consumer sentiment witnessed improvement in December, suggesting a perceived easing of inflation pressures. The Federal Reserve, in its upcoming meeting, is anticipated to maintain interest rates within the current 5.25%-5.50% range, maintaining policy stability since July.
Traders, initially indicating a 60% probability of March Fed rate cuts, adjusted their expectations to just under 50% after the jobs report, with the first reduction now seen as more likely in May. Further rate cuts are priced for 2024, concluding the year with the policy rate expected in the 4%-4.25% range. This adjustment in borrowing costs is viewed as a proactive response to anticipated cooling in inflation rather than a reactive measure to a weakened labor market.
Inflation projections suggest a flat month-on-month and 3% on an annual basis for headline CPI, influenced by falling energy prices. However, core CPI, excluding food and energy, is anticipated to grow by 0.3% month-on-month and 4% annually, surpassing the Fed’s 2% annual inflation target.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
