This Week's Outlook: Can the Rate-Cut Party Continue? PCE Inflation Data Will Test the Strength of the Crypto Market

Last week, the Federal Reserve fired the "first shot" of rate cuts this year, injecting strong liquidity expectations into global risk assets, including cryptocurrencies. In the rate-sensitive crypto market, this dovish shift is undoubtedly a major positive, driving a general recovery in market sentiment. However, after the celebration, the market will face its first real test from the data.

This week, the market's attention will be fully focused on U.S. macroeconomic data, especially the inflation indicators most relied upon by the Federal Reserve. These data will become the core basis for determining the Fed's subsequent rate cut path and will directly affect the flow of global capital and risk appetite. For the crypto market, whether the "party" that started last week can continue largely depends on whether this week's data will give the green light to the Fed's easing policy.

Key Focus 1: This Week's "Grand Finale"—PCE Inflation Data Determines the Liquidity Valve

Friday 20:30 (UTC+8): U.S. August PCE Price Index

Among all macro events, Friday's release of the PCE Price Index is the undisputed focal point. As the "preferred indicator" repeatedly emphasized by Federal Reserve Chair Powell when formulating policy, its results will directly affect the market's pricing of future rate cut pace, and thus determine the abundance of liquidity flowing into the crypto market.

Powell already gave a "preview" at last week's press conference, expecting the core PCE year-on-year for August to remain at 2.9%, which itself sets a clear benchmark for the market.

• Scenario 1 (Bullish for Crypto Market): Data meets or falls below expectations. If the actual data is as mild as Powell expects, or even lower, it will greatly strengthen the market's confidence in consecutive rate cuts in October and December. This means the "easing narrative" supporting risk asset rallies is validated, the liquidity valve will remain open, and a new round of upward momentum may be provided for mainstream crypto assets such as bitcoin and ethereum.
• Scenario 2 (Bearish for Crypto Market): Data unexpectedly "hot". If core inflation, especially service sector inflation, shows any unexpected rebound, the market will interpret this as a signal of "stubborn inflation". This will directly challenge the Fed's dovish stance, forcing it to face a tougher trade-off between "stable employment" and "fighting inflation". The market may quickly lower expectations for subsequent rate cuts, and concerns about "higher rates for longer" will reignite, thus putting short-term selling pressure on risk assets such as the crypto market.

Key Focus 2: The Fed's "Mouthpiece"—Dovish and Hawkish Signals in Powell and Officials' Speeches

From Tuesday (UTC+8): Intensive speeches by Fed Chair Powell and multiple officials

In addition to cold data, the "tone" of Fed officials is also key to guiding market expectations. The crypto market is a narrative-driven field, and the Fed's statements are the source of these narratives.

This week, Powell will deliver his first public speech after the rate cut, and the market will closely watch his wording to judge whether he will further strengthen his dovish stance or try to manage overheated market expectations. In addition, Milan, the new governor who was the only one to vote for a "double" 50 basis point rate cut last week, will also give a speech explaining his logic. His views represent the most dovish voice within the Fed, and whether his influence expands will be an important indicator for crypto market investors to judge the long-term liquidity environment. The collective statements of officials will reveal the degree of policy divergence within the Fed, thereby affecting the market's risk pricing.

Other Macro Signals Worth Watching

Tuesday 21:45 (UTC+8): U.S. September Markit Manufacturing PMI Preliminary

As a leading indicator of economic health, the boom-bust of the manufacturing PMI directly reflects the vitality of the real economy. Last month, this data was unexpectedly strong, causing market concerns. If this week's data shows a slowdown in manufacturing activity, it will be seen as evidence of economic cooling, thus supporting the Fed to continue cutting rates and benefiting risk assets. Conversely, if the data remains strong, it will increase concerns about inflation resilience and add uncertainty to the market.

This Week's Summary and Outlook

In summary, this week is a key one to test the strength of market optimism after the Fed's rate cut. The short-term direction of the crypto market will be closely tied to the "temperature" of the U.S. macro economy. The PCE data is the decisive ultimate test, while Fed officials' speeches and PMI data will continuously adjust market expectations beforehand.

For crypto investors, it is necessary to prepare for potentially heightened market volatility before and after the data releases. Although the general direction of monetary policy has shifted to easing, the road to a low-interest-rate environment is not smooth. Will this week's data add fuel to the crypto market's rally, or will it become an unexpected "speed bump"? The answer will soon be revealed.