High Impact Events Trading... Bitcoin

very insightful! thanks for the thread.

BTC had some whippy price action post analysis. Thanks for your view EventsTrader.

US Employment Data - September Follow up

While NFP came in slightly better than expected, it was the unemployment rate that was the big surprise. The range of estimates were from 3.4%-3.6% and it came in outside of that, at 3.7%. The higher unemployment rate can be attributed to more people joining the workforce. This data didn't do anything one way or another to signal which way the Fed will go with rates later this month. If anything, it might signal they can continue to be aggressive. US CPI data later this month (but before the FOMC meeting), will be heavily monitored.

On the data, bitcoin saw some appreciation but nothing too significant:

And today it ultimately fell, and I'm sure the jobs report factored into the current price drop. A further rate hike may be the catalyst to definitely break 15k - I suspect 17k will be broken beforehand and soon.

Agree, BTC might/could/possibly break 17k next week going into CPI and the ETHmerge. That said, a lot going on in the next few weeks and im trying get my head around whether the rate hike will be priced in or not. At this point there seems to be a 99.9% probability that the FED increases the rate by 0.75. Is that what takes BTC to 15k?

Yes, a rate hike that large isn't going to be completely priced in just because of the immediate impact it has on the traditional markets, everything is tied to interest rates so at least initially the market will react in a huge way and by then I theorize that BTC will already be at the 17.6k level or in the neighborhood so the next stop is 15k.

US CPI - September Preview

1. CPI m/m
2. Core CPI m/m

Forecasts

1. Overall CPI is forecasted to come in at -0.1%. This would be the first negative reading since June 2020. The range of forecasts from economists surveyed by Bloomberg are from -0.4% to 0.2% with most of those between -0.2% through 0.0%. Most economists are predicting a negative reading. The median forecast is -0.1%
2. Core CPI is forecasted at 0.3%. Most economists surveyed by Bloomberg predict 0.3% but quite a few are calling for a little higher at 0.4%.

Recent impacts - (btc/usd) see Jan - July impacts

August 10

Summary

This data has consistently been triggering significant moves in the crypto market. It could be no different tomorrow. The Fed continues to make it clear that the Sept 21st rate decision will be data dependent. A higher than expected reading will probably cause market participants to start pricing in a more certain 75 bps rate hike at next week's meeting. With the probability already at 88%, the questions are how much more is there to price in and will traders start looking to the Nov meeting? That might depend on how high the inflation data we might see. If inflation comes in as expected or lower, it may not signal to the markets that the Fed will only raise by 50 bps. Latest Fedspeak has been Fed officials need multiple data points to start having any confidence in inflation coming down. Here's the current probabilities for the Sept FOMC meeting per CME:

In the scenario that inflation comes in higher than expected, bitcoin would likely sell off while the US dollar rallies. If inflation misses, that would be positive for bitcoin and it should see some appreciation while the US dollar takes a hit. The extent of any rally would depend on how wide a deviation from forecasts. Also, keep in mind that this data has two sets, Core and Overall. The market will be susceptible to whipsaws if one misses and the other comes in higher than expected, this release more than in recent ones.

There is a good chance of a whipsaw if the Core and Overall number paint a different picture. Don't get caught in it. There could be some potential for follow through if we see both inflation figures either higher or lower than expected. If trading this data, wait for a direction to emerge and take what the market gives you. With probabilities where they are, moves could be limited. Caution is advised! Good luck out there!

Very thorough and insightful analysis based on empirical data. Bravo!

The part about a higher than expected CPI potentially triggering the Fed to be more likely to hike by 75 bps rings true in particular.

Keep it coming

Crazy to see this economic data rocking crypto markets!!!

US PPI - September Preview

1. PPI m/m
2. Core PPI m/m

Forecasts

1. Economists surveyed by Bloomberg expect Overall PPI to come in between -0.2% and 0.1%. A lot of uncertainty here as there’s not a clear cut consensus. The average estimate is between -0.1% and -0.2%.
2. Core PPI is a little clearer, but not much. Most economists surveyed believe that the core number will come in at 0.3%. But a considerable number are calling for a bit lower at 0.2%.

Recent impacts - (btc/usd) see Jan - July impacts

August 11th

Summary

PPI data is worth monitoring, especially after today's CPI report, which rocked markets across asset classes.

Last month both the core and overall PPI number came in short of expectations and we saw some gains in bitcoin (after an initial whipsaw) as the US dollar sold off. Moves were limited as it usually will be with this data, since the majority of the focus is garnered by the CPI data, usually one day earlier.

After today's CPI report, I could see these nervous markets potentially overreacting to producer price data. Traders are now pricing in 100% certainty of a September 75 bps rate hike. Not only that, but there is relatively significant pricing in of a 100 bps increase at the September FOMC meeting. Currently the market is pricing in the probability of a 100 bps hike at 28%. Could tomorrow's PPI data be the gasoline on the fire? Not likely, but it's also not out of the question.

Higher than expected PPI data would put selling pressure on bitcoin as the US dollar gains. Conversely, a lower than expected data set would put some buying pressure on bitcoin while the US dollar could give back some of today's gains. The scenario in which we may see the largest moves is one where the producer price indexes come out significantly lower than expected and bitcoin makes up some of today's losses, while the US dollar potentially gives back some gains. There's plenty of room there too.

This PPI report is not likely to impact September rate probabilities in a major way. Any significant moves would likely take significant deviations from forecasts. As always with these releases where there's more than one number that could potentially trigger markets, careful for whipsaws. It's best to implement the wait-and-see approach here. Good luck out there!

US CPI data - September Follow up


Once again, CPI took center stage and did not disappoint. Both the CPI and core CPI data came in much higher than expected. The core data was higher than the range of estimates, a significant deviation from the median forecast at 0.6% vs 0.3% expected. Not many were predicting a positive headline number, coming in at 0.1% vs -0.1% expected. Prior to the release the probability for a 75 bps Sept rate hike was at about 90%, with the other 10% at 50 bps. After the inflation data, the probability for at least a 75 bps rate hike at next week's meeting is at 100%, and some believing that a 100 bps is on the table. Currently there's a 38% chance of a 100 bps rate hike for Sept FOMC, per CME. 10% higher than just an hour ago when I made my last post.

The higher than expected data was after a stronger than expected NFP number earlier this month. This is all the markets needed. Barring any unforeseen event, the data-dependent Fed will continue to be aggressive with rate hikes. The US dollar rallied across the board and anything priced in dollars (bitcoin, gold, crude, etc) tanked. Absolutely tanked. It's been a while since we've seen a move of this magnitude. As long as the Fed continues to signal their decisions will be based on data, we could see more of these big moves on data in the months to come.

Great coverage of CPI! Your preview was spot-on.

Environment feels reminiscent of early June, leading into the first 75bps hike this cycle. It seemed that UMich sentiment had a larger than typical impact into that hike, with WSJ referencing it in their big market-moving preview and Powell mentioning the data in his presser. Since then the data has been expansionary and seems to be building positive momentum.

Do you think there's much room for surprise surrounding this Friday's release? Forecasts seem optimistic against the reality in CPI prints.

Powell did give UoM Consumer Sentiment extra attention. He also mentioned the employment cost index not too long ago and it hasn't had any impact. UoM has always had significance, Powell was probably some fuel to that fire.

I don't expect it to move the needle much tomorrow. One way or another, I don't think the data will change what the market is pricing in for the Sept FOMC meeting next week. I expect it to have impact, but very limited outside of some huge surprise.

US PPI data - September Follow up

After an initial whipsaw, bitcoin moved a little higher on slightly higher than expected inflation data. As expected, the move was limited.

Overall PPI was in line with expectations at -0.1% vs -0.1% expected, while the core number came in slightly higher than at 0.4% vs 0.3% expected. While the -0.1% overall PPI number was in line with expectations, as mentioned in the preview, the range of estimates were skewed to a lower reading if there was a deviation from forecasts. Same with the core PPI figure. While the median forecast was 0.3%, there were quite a few estimates for 0.2%. Very slight deviations from forecasts. No big surprises. One day earlier, CPI took most of the focus. There probably wasn't a scenario in which this PPI data would've changed Sept FOMC rate hike expectations, which is why any move was expected to be limited, as it was.

All focus now shifts to the FOMC meeting next week.

Very interesting.
Can you share please how do you trade this news event?
Thanks

US FOMC - September Preview


Forecasts and expectations

Federal Funds Rate

Although the market is pricing in an 18% chance of a 100 bps points rake hike, it’s not what economists are forecasting. Of economists surveyed by Bloomberg, there’s almost 100% consensus that the Fed will raise rates by 75 basis points. There’s only one legitimate outlier calling for 100 bps (Nomura). Any other forecasts for anything other than a 75 bps hike were submitted prior to US CPI, thus too old and stale. Here's what the markets are currently pricing in per CME:

FOMC Statement

It’s widely expected that this statement will be hawkish.

FOMC Economic Projections

The dot plot should get a lot of attention and could end up being the focus. Since it’s September, we’ll get to see projections into 2025. But the focus will be on the 2022 and peak 2023 dot plot.

Unemployment rate: The highest rate of unemployment (in a range) in June’s projections was 4.5%. Since June, inflation has proven to be more embedded than previously thought. Higher rates will mean higher unemployment. I’d expect this to see the projections tick up.

GDP: It could show some revisions downward and 2023 will be the one to pay closest attention to. Last release showed the bottom end of the 2023 forecast at 0.8%. We could see that move lower.

PCE: From March to June, the Fed revised the 2022 PCE upper band projection from 5.5% to 6.2%. Common sense says that should be revised higher. We'll also be looking for any revisions higher in the longer term PCE inflation projections. The high end of the range in the 2023 inflation projections were 4.0%. The Fed is slow in revising longer term forecast projections so when they do it’s worth paying attention to.

Federal funds rate: This is where it's at. The dot plot will be scrutinized. I’d expect to see some revisions higher, especially in 2022 and 2023. The question is how much higher. It’ll also be interesting to see where the Fed see the first rate cut. But the attention will be on 2022 and 2023. Here’s what June’s dot plot looked like:

FOMC Press Conference

If Powell doesn’t take a hawkish tone it’ll be a surprise.

Recent Impacts (btc/usd)

First line is at FOMC rate/statement/projections. Second dotted line is at FOMC press conference (30 mins later).

Jan 26

Mar 16

May 4

Jun 15

Jul 27


Outlook

This is a big one. The only thing we can expect with 100% certainty is... volatility. A lot of it.

Although the forecasts from Bloomberg are aligned at a hike of 75 bps, the market is still pricing in an 18% chance of 100 bps. That's not expected to change in the next 24 hours.

Both the rate statement and the economic projections will have to be digested. The statement is expected to be hawkish and the projections should show the consequences of it. This is the first time we'll see projections as far out to 2025, but the focus will be on 2022 and 2023. It'll show where they expect to end 2022. Given there are only two meetings left this year, the dot plot will all but tell the markets how aggressive they plan to be in Nov and Dec. Currently, the market is mostly pricing in rates at or below 4.50% to end the year.

The 2023 dots will show us peak rates, which is expected to be 4.5% or greater, which would be higher than what was shown June's projections. The key here is how high are they projecting. 4.5% would probably be what most are expecting. Anything at 4.75% or higher would be taken as hawkish. Currently, here's what the market is pricing in midway through 2023 (peak).

Given the September surprise in US CPI data, it's hard to envision a scenario where the Fed comes across as dovish. There's a ton to digest at release time, and there's potential for volatility in either direction before taking any direction. There's probably no way to accurately predict what will happen given that there's multiple combinations of what could happen, but here are some general scenarios to keep in mind:

1. 75 bps rate hike is widely expected. If the Fed hikes by 100 bps, then all bets are off and the US dollar rallies while bitcoin sells off.
2. A hawkish statement will put buying pressure on the US dollar and selling into bitcoin. A dovish statement would support bitcoin price and selling pressure would come into the US dollar.
3. Fed dot plot showing higher than expected rate hikes for the rest of 2022 and higher than expected peak rates in 2023 would support the US dollar and send bitcoin lower. Lower than expected rate hikes for 2022 and lower than expected peak rates in 2023 would be positive for bitcoin and send US dollar lower.
4. A hawkish tone from Powell in his press conference would be bullish for the US dollar and put selling pressure into bitcoin.

There's a lot to consider and whatever happens at release time will be overshadowed 30 minutes later during Powell's press conference. He could try to calm the markets. Given that he didn't deliver his intended hawkish message in July, I'd expect him to keep a hawkish tone. The expectation is for Powell to stand firm in the fight against inflation. The overall consensus is for the Fed to be generally hawkish. It's probably the most likely scenario but anything can happen. Unprecedented times.

Summary

There will be trading opportunities but patience is required. There's a lot to consider when jumping into a trade during the rate announcement. The statement and more importantly, the dot plot need to be digested. There's not much time to do that before the press conference 30 minutes later. Any trades taken prior to the FOMC press conference would be at the mercy of Powell. As we can see in the recent impacts above, a direction usually doesn't have follow through until after Powell takes the mic. That's where the opportunities are. Early in the presser, Powell will set the tone. A hawkish tone will send bitcoin lower as the US dollar rallies. Conversely, a more dovish tone would send bitcoin higher as the US dollar sells off. It's usually not a trade you have to jump into early. Wait for the trend to emerge! Good luck out there and as always, caution is advised!

lots of alpha.....greatly appreciated!

Can you share please how do you trade this news event?
Thanks

Tomorrow's PPI report might be a market mover. It's usually not but here are some things to consider:

1. This month's release is one of the rare times the PPI report is released before the CPI data (due out Thursday).
2. The fact that it's coming before CPI may increase chances for impact. Inflation data is still very much in focus.
3. Overall PPI m/m is expected to come in at 0.2%. However, economists surveyed by Bloomberg were not in agreement. While the median is 0.2% the average is 0.1% (0.14%). There were about just as many calling for 0.0% as there were 0.1%. We could see a miss here. In any case, there's potential for a deviation from forecasts. Since forecasts are not aligned even a number coming in as expected to trigger a move, although limited.
4. Core PPI m/m is expected at 0.3%. The range of estimates is mostly between 0.2% and 0.4%. The majority of economists surveyed by Bloomberg are aligned at 0.3%

I'd expect limited moves unless we see PPI miss by two percentage points or greater. Same with core PPI. If we see deviations from forecasts, they'd have to paint the same picture (same direction), otherwise look out for a whipsaw.

My advise for trading PPI is to stay on the sidelines. Historically, it generally doesn't move bitcoin by that much. We'll see CPI data on Thursday which should present some trading opportunities. Good luck out there!

US PPI data - October Follow up

In the preview, I stated that even an in line PPI number could trigger a move. That long with Core PPI coming in higher than expected caused spikes across asset classes. Although they were quickly reversed. The bigger than usual move on PPI data was expected as this is one of those rare occurrences where PPI data is released ahead of CPI (tomorrow).

At release, bitcoin immediately sold off as the US dollar rose. The knee jerk reaction was quickly reversed as it ended up pretty much where it started off prior to the release. That's why it's not wise to attempt to trade the PPI number.