U.S. CPI ahead, SEC approves first spot Bitcoin ETFs - what's moving markets

investing.com:

Investing.com -- Traders are awaiting key U.S. inflation numbers for December, which could play into how the Federal Reserve approaches potential interest rate reductions this year. Elsewhere, the U.S. Securities and Exchange Commission approves several applications to create spot Bitcoin exchange-traded funds, in a landmark decision for the cryptocurrency industry.

1. Crucial inflation data ahead

Headline U.S. inflation is expected to have sped up marginally in December, while the annual underlying reading is seen slowing, as Federal Reserve officials search for signs of easing price gains before rolling out possible interest rate cuts this year.

Economists estimate that the year-on-year consumer price index (CPI) from the world's largest economy accelerated to 3.2% last month, up from 3.1% in November. Month-on-month, the pace is projected to increase to 0.2%.

But the rate of the so-called "core" measure, which strips out volatile items like food and energy, is tipped to drop to 3.8%, down from 4.0% in the prior month. On a monthly basis, core CPI is anticipated to match November's figure of 0.3%.

Fed policymakers will likely be closely watching the data, which could factor into how they approach rate reductions later in 2024. In a speech on Wednesday, New York Fed President John Williams argued it is still too soon to call for cuts because inflation is well above the bank's stated 2% target.

Williams' comments echoed sentiments from other rate-setters, who have recently moved to temper soaring market enthusiasm for potential reductions early this year. This optimism, fueled in part by a dovish Fed outlook last month, drove a rally in stocks in the final weeks of 2023 that has since lost some steam.

2. Futures edge