Markets expect a 100% chance of a rate cut this month, with debate over 0.25% or 0.50%.
Crypto markets are holding steady as investors await key U.S. economic data, with BTC price trading just near $112,000.
Futures now put a 100% probability on a September Fed rate cut, split roughly 90% odds of 25bps versus 10% for 50bps.
Analysts note that Tuesday’s preliminary 12-month jobs revision is likely to show 700,000-800,000 fewer jobs than originally reported, a factor that could influence the Fed’s decision as much as later CPI/PPI readings.
In the crypto market, the US Spot Bitcoin ETF saw $246.42 million of net inflows last week, while Ethereum ETFs suffered $787.74 million of outflows in early September.
In turn, crypto market traders fully expect the Fed to cut rates at its mid-September meeting. This development is likely to carry major implications for the broader financial sector, let alone the digital assets space.
Standard Chartered now predicts a 50bp cut (up from its prior 25bp outlook) following the weak August jobs report. On the other hand, Morgan Stanley and Deutsche Bank still judge that only a 25bp move is warranted.
Fed funds futures reflect this split: markets assign roughly a 90% chance to a 25bp cut and about a 10% chance to 50bp.
Tuesday’s release of the BLS annual benchmark jobs revision will be closely watched. Economists estimate it could trim on the order of 700k-800k jobs from March 2025 totals.
Analysts note that with “nearly three rate cuts priced in,” the crypto market will be watching whether this revision triggers a push toward a 50bp cut.
Institutional crypto market flows have diverged sharply. The investors are now evaluating the potential move of the institutions in the coming weeks.
Data from SoSoValue indicate that spot Bitcoin ETFs accumulated $246.42 million net in the week of Sept. 1-5. On the other hand, a record $787.74 million of outflows from spot Ethereum ETFs over the same period.
The data underscore a divergence in sentiment: investors appear to favor Bitcoin. In the digital assets space, this flow contrast suggests continued confidence in Bitcoin relative to Ethereum amid the current macro backdrop.
The crypto market also awaits the crucial inflation figures this week. This set of data is likely to weigh on the investors’ sentiment, while setting the stage for the Fed’s next move.
Later this week brings key inflation and sentiment data. U.S. wholesale inflation (PPI) for August is due on Wednesday, followed by the August US CPI report on Thursday.
On Friday, the University of Michigan will publish its preliminary September Consumer Sentiment Index. These reports will offer fresh signals for markets and crypto.
In particular, softer-than-expected inflation or a decline in consumer confidence would reinforce expectations of Fed easing (a factor often seen as bullish for crypto), whereas upside surprises could temper that view.
As the Kobeissi Letter put it, “It’s all about inflation this week ahead of a pivotal Fed meeting.” For the crypto market, the outcome is crucial: a softer CPI or sentiment reading would cement the dovish Fed outlook, while any upside surprise could prompt caution.
Read more on The Coin Republic
