Investors look back on a bearish trading week. Contrary to expectations, the consumer price index (CPI) in the USA rose from 8.1 percent to 8.3 percent after the recent downward trend in prices in the previous months. Market participants took this development as proof that inflation is not slowing down for the time being. As a result, investors dumped their stock and crypto holdings en masse, ending in a Black Tuesday.
The US technology index Nasdaq100 lost almost six percentage points, falling more than it has since March 2020. Tech blue chips like Apple and Amazon weren’t spared either, trending down six to eight percentage points. The prices of supposedly risk-averse asset classes such as US government bonds, gold and defensive stocks from the pharmaceutical sector were also punished. At the same time, the US dollar index DXY rose to a new high for the year. The general sell-off also caused prices on the crypto market to be corrected significantly downwards.
Even the successful conversion of the consensus mechanism of the ETH blockchain from Proof of Work to Proof of Stake last Thursday morning could not positively influence the bearish weekly trend. Despite the successful merger, investors increasingly sold their ethers in view of the high inflation rates in the USA. The price of the second largest cryptocurrency subsequently fell by 12 percentage points. On a weekly basis, the price drop is even 19 percent.
In addition to continuing negative news from the economy, investors were already causing volatile price movements on the US stock markets days before the big expiry date at the end of the week. The triple expiry of bets on indices, commodities and foreign exchange, dubbed the witches’ sabbath, caused a bearish end to the week on the classic financial market and pulled the crypto market with it.
Building permits in the US on Tuesday
Tomorrow, Tuesday, September 20, at 2:30 p.m. (CET), the Consensus Bureau will first publish the number of building permits for the month of August in the USA. As in the previous month, an increase in building permits could cause a price rally on the American stock market. The experts’ forecast for the past month is 1.610 million. The analysts have again reduced their expectations. In July, 1.685 million building permits were issued. The number of building permits in the USA is considered a leading indicator for the housing market.
If the approved approvals again exceed the experts’ expectations, this would indicate an unchanged robust real estate sector in the USA. However, a persistently strong real estate sector should encourage the US Federal Reserve to stick to the planned interest rate hikes and further tighten monetary policy, as announced by Fed Chairman Powell last week. It is difficult to predict whether strong numbers from the housing market will have a positive effect on prices on the stock and crypto market, as has been the case recently. Statistically, strong numbers in the real estate market have a positive effect on the US dollar and thus tend to have a negative effect on BTC and Co.
Existing home sales data mid-week
The trading day on Wednesday, September 21 starts at 16:00 (CET) with sales figures for the month of August for existing properties. The data published monthly by the Association of US Real Estate Agents reflects the current level of consumer spending. Higher-than-predicted sales indicate rising consumer spending in the US. If house sales of existing properties continue to decline as in the previous month and the number of 4.70 million property sales expected by market analysts is undercut, the negative trend of sustained consumer restraint would become more entrenched. Weak sales numbers usually have a negative impact on US dollar strength, which could have a positive impact on crypto market prices in the current climate.
Interest rate decision and press conference by the US Federal Reserve on Wednesday evening
At 8:00 p.m. (CET), all market participants in Europe and the USA are spellbound at the Fed’s interest rate decision. At 8:00 p.m. (CET), the US monetary authorities will announce their latest interest rate adjustment. Until recently, the majority of analysts assumed that interest rates would rise by 50 basis points. However, last week’s CPI consumer price index, which was higher than forecast by experts, could prompt Fed Chair Powell to raise the key interest rate again by 75 basis points in order to counteract the recent rise in inflation. Some analysts have even considered 100 basis points to be sensible and conceivable in the last few days.
A higher-than-expected rate hike could in turn encourage investors to continue to divest themselves of risky asset classes such as cryptocurrencies. Afterwards, Powell answered journalists’ questions as usual. Experts will scrutinize Powell’s remarks on the Fed’s monetary policy over the coming months to derive possible clues to a change in fiscal policy stance.
Long-awaited hard fork Vasil on Thursday
The day after the interest rate decision in the USA, the second important crypto event is waiting with the hard fork Vasil on the Cardano blockchain, just one week after ETH’s successfully completed merger. In view of a “Sell the Fact” following ETH’s switch to Proof-of-Stake (POS), investors should not expect leaps in the air in the entire crypto market even with a successful Vasil upgrade. Even if the Cardano course (ADA) can increase after the hard fork is completed, the impact on the overall market can be classified as low. In fact, the Fed’s interest rate policy measures announced the night before are likely to have a significant impact on price developments on the global financial markets in the days that follow, pushing Vasil into the background.
Several purchasing managers’ indices in the US at the end of the week
On Friday, September 23, investors will be watching the release of the ISM Purchasing Managers’ Index (PMI) for the US manufacturing and service sectors. At 4:00 p.m. (CET), the Institute for Supply Management in the USA will present the results for both purchasing managers’ indices. The current forecast by the experts for the manufacturing sector in September is 51.2. In the previous month, the index had already fallen more than expected to 51.5.
Expectations for the service sector are even weaker. Here, the market experts are forecasting a slight improvement to 45.0 after a value of 43.7 in September, but this is still a long way from the threshold of 50. However, it is positive for BTC and Co. that weak purchasing manager indices usually have a negative effect on the development of the US dollar. As a result, the crypto sector could gain some ground. Whether the Fed will reconsider its interest rate policy if the economic figures continue to be weak can only be assessed more precisely after considering further key data in the coming months.