After a slight stabilization at the beginning of the week, partly due to a higher than forecast CB consumer confidence in the US, the US financial market turned south again and trended weaker again. A stronger than expected increase in the consumer price index (CPI) in the euro zone of now 9.1 percentage points underpins the persistently high inflation in Europe. The fact that the PMI purchasing manager indices in the USA were also stronger than expected should be grist to the mills of the representatives of the two important central banks, the Fed and the ECB. Better than expected fundamental data coupled with persistently high inflation rates will encourage the world’s two most important central bankers, US Federal Reserve Chairman Powell and ECB President Lagarde, to stick to their planned interest rate hikes at the upcoming central bank meetings in September. The bearish price developments in the past trading week also caused prices on the crypto market to correct again.
Crypto market is more resilient than expected
The fact that BTC and ETH were able to hold their ground relatively well in this difficult situation, despite a Nasdaq closing price in the area of the weekly low, is to be rated positively. Although the BTC price ranged in a narrow range between USD 19,500 and USD 20,500 in the last seven trading days, it gradually formed slightly higher lows and does not seem to want to give up the area around the psychological mark of USD 20,000 for the time being. The ether course was even more resilient to an impending course correction. In anticipation of the start of “The Merge” on September 6, investors seem to continue to expect ETH to rise again until the proof-of-work to proof-of-stake transition is complete.
All eyes are on Thursday, September 8th for the upcoming trading week. The European Central Bank announces its interest rate decision on this day. Since Fed Chairman Powell will also appear in front of the cameras on Thursday afternoon, significantly increased volatility can be expected. You can read in the following overview article which other economic data from the euro area and the USA are likely to have an impact on the price development of BTC, ETH and Co. in the upcoming trading week.
ISM US Services Purchasing Managers’ Index (PMI) in focus at the start of the week
Numbers will start today. On September 6th at 16:00 (CET) new figures of the ISM Purchasing Managers’ Index for the services sector will be published. Analysts are forecasting a reading of 55.5 for the month of August after 56.7 previously. If the figures for the manufacturing sector are also stronger than expected, as was the case recently with the counterpart for the manufacturing sector, the US central bank should see its current policy of further interest rate hikes confirmed. A value below the threshold of 50, on the other hand, would indicate a contraction in economic activity. A falling purchasing managers’ index could force Fed Chairman Powell to re-evaluate the aggressive interest rate policy propagated at the Jackson Hole meeting. A more defensive stance by the Fed should have a positive effect on the US stock markets and the BTC price, at least as an initial reaction.
Also on Tuesday, the first part of the “merge” of the second largest cryptocurrency, ETH, begins. If the merger of the beacon chain with the ETH mainnet starts without any significant problems, this should have a positive effect on the price development of ETH. However, if, contrary to expectations, there is another delay due to unexpected errors, investors could reconsider their strategy when investing in ETH. The ether course is likely to suffer from selling pressure.
Showdown on Thursday
On Thursday 8 September at 14:15 (CET) market participants will first look to Brussels. The ECB announces its key interest rate decision and the interest rate for the deposit facility. Since Jackson Hole, investors have been expecting an even stronger increase in key interest rates of 100 basis points and not just 50 basis points as recently rumored. The deposit facility is also likely to be raised again by 50 basis points to 0.50 percent. A few weeks ago, the market experts were still expecting an increase of just 25 basis points. At the last ECB interest rate decision, ECB boss Lagarde surprised the experts with an interest rate hike of 0.5 percentage points.
In view of the recently increased more than expected inflation rate in the euro area from 8.9 percent to 9.1 percent, ECB boss Lagarde believes that significant interest rate hikes should be absolutely necessary. Interest rate adjustments that are stronger than expected by market participants should lead to a recovery of the weak euro exchange rate against the US dollar. It remains to be seen whether a slight consolidation of the US dollar will be enough to ensure a recovery in the BTC price. Crypto investors should definitely wait for the first price reaction after the publication of the key interest rate adjustment, as this often goes in the wrong direction, as was observed last Friday in the US NFP labor market report.
Short-term press conferences of central bank governors in focus
The press conference held at short notice by US Federal Reserve Chairman Powell should also be of great interest to market participants. Investors can find out from 3:10 p.m. (CET) what Mr. Powell wants to address. The fact that Ms. Lagarde, despite the ECB press conference following the interest rate decision at 2:45 p.m. (CET), appears again in front of the camera at 4:15 p.m. (CET), according to various economic calendars, is also a novelty and seems to be due to the current precarious situation in Europe . Significantly increased volatility can therefore be expected from Thursday afternoon.
EU summit seals second trading week in September
On Friday, September 9th, the EU summit begins at 12:00 noon (CET) in Brussels. Most recently, the representatives of the member states met on March 26th, 2021 to discuss the current problems in the European Union and possible solutions. In particular, the press conference following the summit meeting should lead to increased price movements on the foreign exchange market and on the stock market. Strong price movements on the European stock exchanges could also affect the crypto market.