That could leave markets with a relatively muted response if the Fed does what everyone expects. The bigger move may come if the central bank refrains from raising rates.
“We see greater potential for an outsized move in risk assets to the topside should the Fed ultimately fail to deliver on these hawkish expectations,” Kruger said.
Matt Mena, senior crypto research strategist at 21Shares, doesn’t see a hike as an automatic problem for bitcoin. He said bitcoin has gained an average 2.13% over the 30 days following hotter-than-expected core CPI readings.
Mena also pointed to gains in ether ETH$2,477.31 and solana (SOL) as a sign that traders haven’t backed away from crypto risk.
“That’s due to inflation and credibility issues,” Risk Dimensions CIO Mark Connors said, noting the rise in bitcoin and gold following this morning’s data. Connors had previously argued that softer measures of inflation could give Fed Chair Kevin Warsh room to hold rates. Friday’s data changed the picture.
“The market has now challenged both sides of policy,” Connors said. “Bessent went first. Even tripling Treasury buybacks hasn’t tamed the long end. Now, Warsh, after talking disinflation, is being forced towards higher rates.”
Connors pointed to yields rising across the Treasury curve even as Treasury Secretary Scott Bessent expanded long-duration bond buybacks. He sees the move as a sign that investors are worried about more than where the Fed sets rates next week.
