The Fed’s preferred inflation gauge, core personal consumption expenditures (PCE), is likely to rise in September — moving in the wrong direction. Yet the VIX showed no signs of major turbulence.
FactSet data shows that core personal consumption expenditures may have increased by 2.9% year-on-year in September, running counter to the Federal Reserve’s 2% annual interest rate target. If the actual number is as expected, it would mark the 55th consecutive month that inflation has been above the Fed’s 2% target. Sticky inflation will empower the Fed’s hawks, who favor a slow rate cut.
However, Volmex’s annualized single-day Bitcoin Implied Volatility Index (BVIV) is hovering in the familiar range of around 36% as of this writing, according to data source TradingView. This equates to an expected 24-hour price movement of 1.88%, which is not surprising.
Regardless of the PCE data, low volatility expectations may stem from expectations of a rate cut by the Federal Reserve next week. CME’s FedWatch tool predicts that a 25 basis point interest rate cut on December 10 is a foregone conclusion.
The weaker-than-expected report could push the 10-year Treasury yield below 4%, helping BTC break out of the two-day trading range of $92,000 to $94,000.
“Weak labor data and curbs in personal consumption spending will reinforce the easing narrative supporting the cryptocurrency rally, while any upside surprises could keep the market range-bound until the Fed clarifies its path,” Nexo Dispatch analyst Iliya Kalchev said in an email.
However, analysts at ING warned that any decline in benchmark yields could be short-lived.
The data could have a similar impact on alternative cryptocurrencies.
Speaking of Ethereum, its one-day implied volatility index is 57.23%, which means that the 24-hour price fluctuation is 3%, which is slightly higher than Bitcoin. Meanwhile, SOL’s Volatility Index indicates a price change of 3.86% and XRP’s 4.3%.
