Crypto Market Awaits US PCE as US-EU Trade Tension Intensifies

Key Insights:

• US PCE inflation is scheduled for Thursday
• The latest CPI and PPI figures to watch for crypto market trends.
• EU’s latest call amid soaring trade tensions with the US

The crypto market is headed into another critical week that may determine directional moves. A mix of economic data and rising political tensions could influence investor sentiment this week.

The US Federal Reserve’s economic releases have had a prominent influence on crypto prices in recent history. The market expects the same trend to prevail. Therefore, the upcoming US Personal Consumption Expenditures (PCE) data may determine investor sentiment this week.

The upcoming US PCE inflation data may have an even bigger impact on the crypto market this time.  That’s because the government shutdown delayed the November and December data.

In other words, the upcoming US PCE data may thus be weighty, particularly considering the economic pressures that prevailed in Q4. According to the Bureau of Economic Analysis (BEA), the US PCE clocked 2.8% in September, slightly down from 2.9% in August.

The official narrative around the PCE figures was that they remained slightly elevated compared to the FED’s target of 2%.

Here’s Why the US PCE Data is Important for the Crypto Market

The FED relies on US PCE data to determine the level of inflation. It then uses this information to make interest rate decisions. This is at least one of the indicators used, and it has recently been critical in determining market sentiment.

Higher inflation means the FED is more likely to raise rates, which in turn sucks liquidity out of the market. This outcome is usually bearish for the crypto market. Conversely, lower PCE data signals lower inflation. If it falls low enough, the FED may lower rates, especially when it needs to stimulate the economy.

The US CPI data was also delayed, just as was the case for the CPE data. The Bureau of Labor Statistics (BLS) revealed that the PPI for final demand surged by 0.22% in November. The next PPI data release is slated for 30 January.

Meanwhile, the US CPI rose by 0.3% in December, according to data released last week. The next CPI print will be released in February. It was in line with the pesky inflation levels that the FED has been trying to control.

Trade Wars May Be Back on the Table Amid Rising Political Tensions

Geopolitical temperatures have been rising and may have a significant impact on crypto prices in the coming weeks. This was the key reason why the market has been adopting caution despite the rising optimism.

Recent reports revealed that French President Macron is calling on the European Union (EU) to take drastic measures against the US. This was after President Trump’s recent threats towards Greenland, including tariff threats.

Trump’s aggressive push and fallout with the EU have caused friction and threaten to break the existing economic order. The EU may respond by invoking the “anti-coercion instrument.” It means the US may be restricted from accessing EU markets.

Such an outcome risks triggering another tariff war between the US and European markets. It would likely lead to economic disruption, potentially negatively affecting risk-on assets such as crypto.

If economic data, including US PCE and PPI, push higher, it could signal more economic pressure. This would lead to a negative outcome for the market. These data points may determine if the crypto market will continue to rally or whether investor sentiment will deteriorate, paving the way for outflows.