The Fed’s preferred inflation gauge, core PCE, likely rose in September, heading in the wrong direction. Yet volatility indices show no signs of major turbulence.
Core PCE likely rose 2.9% year over year in September, moving in the wrong direction from the Fed’s target of a 2% annual rate, according to FactSet. If the actual figure matches estimates, it would mark 55 straight months of inflation above the Fed’s 2% target. Persistent inflation would strengthen the Fed’s hawks, who favor slower rate cuts.
Yet at the time of writing, Volmex’s annualized one-day bitcoin implied volatility index, BVIV, was hovering in familiar ranges around 36%, according to data source TradingView. This equates to an expected 24-hour price change of 1.88%, which is nothing to write home about.
Low volatility expectations likely stem from the Fed’s planned rate cuts next week, regardless of PCE data. CME’s FedWatch tool forecasts a 25 basis point cut on December 10, which is a done deal.
A weaker-than-expected report could push the 10-year Treasury yield below 4%, helping BTC break out of its two-day trading range between $92,000 and $94,000.
“A softer Labor reading and contained PCE would strengthen the easing narrative supporting the crypto rebound, while any upside surprises could keep markets range-bound until the Fed clarifies its path,” Nexo Dispatch analyst Iliya Kalchev said in an email.
However, ING analysts warned that any drop in the benchmark yield could be short-lived.
The data could have a similar impact on alternative cryptocurrencies.
Speaking of ether, its one-day implied volatility index was 57.23%, implying a 24-hour price change of 3%, slightly higher than that of bitcoin. Meanwhile, the SOL Volatility Index reports a price action of 3.86%, with XRP at 4.3%.
