Crypto markets brace for impact from US inflation data this week

A significant week for the U.S. economy is underway, with crucial inflation reports set to influence crypto markets.

Over the past week, the crypto sector has seen a retreat, with more than $300 billion exiting the market.

Trading over the weekend remained flat, but a minor spike in activity was noted on Monday morning in Asia, followed by a price correction.

Key inflation reports are anticipated this week, which could affect central bank monetary policy decisions.

This data will be the last Consumer Price Index (CPI) and Producer Price Index (PPI) information released before the Federal Reserve's meeting on January 29.

Recent economic indicators suggest rising inflation expectations, as reflected in the Consumer Sentiment index and ISM Services PMI report.

These trends have negatively impacted high-risk assets like cryptocurrencies and tech stocks.

The PPI report is scheduled for release on Tuesday, providing insights into producers' input prices, which directly affect retail pricing and signal inflationary pressures.

Following that, December’s Core CPI report will be released on Wednesday, measuring average changes in consumer prices for goods and services.

“The Fed is widely expected to pause its rate-cutting cycle at its next meeting at the end of the month, but firmer-than-expected CPI data could push back market projections for further easing even later in the year,” Reuters noted.

Additionally, December's Retail Sales report is due on Thursday, offering insights into consumer spending patterns and overall economic health.

As for the crypto market, total market capitalisation remained flat over the weekend but fell below $3.4 trillion.

Bitcoin (CRYPTO:BTC) experienced a brief spike close to $96,000 before retreating to around $94,000, marking a 5% decline over the past week.

Ethereum (CRYPTO:BTC) mirrored this trend with an 11% drop over the same period.

With these economic events unfolding, crypto markets are closely monitoring inflation data that may dictate future performance and investor sentiment.