The price of Bitcoin may see a significant increase today Friday, December 23 at 8:30 am (EST) if the price of Core Personal Consumption Expenditure (PCE) is better than expected. And chances are high!
The price of Bitcoin has been heavily influenced by the recent US Federal Reserve (FED) decision. The last FOMC meeting of the year on December 13 gave a surprise low, although the consumer price (CPI) was better than expected.
However, there is a catch. After the FOMC meeting, rumors surfaced that Chairman Jerome Powell ignored the CPI data that came in the hours before the meeting, despite saying no at the press conference. Inside Wall Street, many analysts have spoken out, accusing Powell of lying.
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Why Today’s ECP is So Important?
The problem is that the Fed’s forecast for core PCE prices looks too high after surprisingly weak CPI data, as Fundstrat analyst Tomas Lee wrote.
As indicated in the economic forecast review, the FED raised the PCE inflation target for 2022 from 4.5% to 4.8%. With that, Powell added “high for a long time” to the report. But there was something “bad”, as Lee explained. The month-to-month percentage change would need to be significantly higher to beat the Fed’s 4.8% target.
Lee expects the FED to forecast a core PCE growth of 4.8% in 2022 when inflation continues at 4.1-4.2%. “How far will Fed policy go?” Lee wrote.
The analyst points to a ransomware attack against Haver Analytics as a possible reason for the large discrepancy. As a result of the attack, Haver Analytics may not be able to update the data, which made Jerome Powell and the FOMC committee ignore the good data.
Therefore, according to Fundstrat analyst, today’s PCE release is the most important. Lee writes:
We expect core PCE to be 0.10% vs. The Cleveland Fed now forecasts inflation at 0.26%. Any rate below 0.40% will increase the #FOMC rate of 4.8%. Significantly, PCE is also a key data point for the US central bank. The Fed’s 2% target is not based on CPI, but on PCE. Twitter user ZeroHedge made an estimate based on this:
If tomorrow’s Core PCE is 4.5% or less (~75% chance), the whole FOMC hawkish rate hike is blown – nothing December 4.8% Core PCE , SEP / Dots revised in numbers the end falls.
Impact on the Price of Bitcoin
If the PCE is less than what the Fed expects, the theory will find confirmation today and can completely destroy the physical effect. The FED may be forced to revise its policy because PCE indicates that inflation is under control.
This could make the FED get a good position in the next meeting, and the markets are leading today. Ultimately, PCE easing could lead to a weaker dollar, boosting risky assets like Bitcoin. At press time, the price of Bitcoin stands at $16,827. Today, like a few days ago, the $16,900 level will be the most important as the most important resistance at this time.
If there is strong pressure above this resistance, the next step will be the $17,400 area. Otherwise, Bitcoin investors should focus on support at $16,400.