Expectations of Volatility Accumulate
The traders started the Christmas week with the optimistic anticipation of price movements occasioned by the macroeconomic occurrences. Slim vacation liquidity tends to exaggerate market responses to data announcements. Therefore, the investors paid close attention to the planned economic markers and the activities of central banks.At the beginning of the week, the Federal Reserve conducted repurchase agreements in financial markets at the cost of 6.8 billion dollars. This action expanded an expanded push of liquidity that exceeded over 38 billion dollars in the last ten days. In addition, the move corresponded with the recent reduction of the Fed funds rate and the termination of quantitative tightening.
The magnitude of current liquidity transactions was an indication of transition to more relaxed financial conditions. The same amount of repo activity was observed in 2020 when the market was stressed. Therefore, the policy stand was perceived as favorable to risk assets such as cryptocurrencies by investors.
The focus of the markets now shifts to the publication of the US GDP figures in the third quarter which will be released on Tuesday. Economists are projecting a 2.5 percent annualized growth, which can be used to provide insight into the economic momentum. Nonetheless, any unexpected event might affect crypto mood.
Recent labor market statistics revealed better job growth with an increased unemployment rate to 4.6 percent. These ambiguous indications have retained markets vulnerable to the new economic dynamics. Also, the GDP data can formulate future expectations regarding future Federal Reserve rates. The initial jobless claims data towards the end of the week may also have an impact on the market positioning. An increase in claims can increase policy-easing expectations. On the other hand, the consistency of labor would lead to less pressure of further cut in the rates.
The Signals in China Liquidity Matter
The future M2 of China money supply numbers are also still under the scrutiny of the global markets. In November, the nation registered an eight percent annual growth in its year over year, taking its total M2 to all time high of 336.9 trillion yuan. Markedly, the growth of the Chinese liquidity tends to underpin the world risk appetite.The traditional markets will shut over the Christmas holidays and diminish the overall liquidity. During this time crypto markets will not cease their trading activities. It is therefore possible that price movement starts to become sharper with fewer participants in the game.
