Weak economic data could help stocks and virtual currencies, including Bitcoin (BTC), recover from the most recent lows. According to Raoul Pal, things could get bad for risk assets such as equities and cryptocurrencies. As he explained, only weak economic data this week could help these two markets find relief. Bitcoin fell below $18,000 a few months ago and central banks, especially the FED, could continue raising interest rates in the future.
Could Weak Economic Data Help Bitcoin Recover?
Raoul Pal, investment strategist and the Founder and CEO of Global Macro Investor, wrote a Tweet thread in which he explained the current global macro environment. In this thread, he mentioned cryptocurrencies and how economic data could help (or not) Bitcoin and equities recover from their most recent lows.
But it could cause a nasty week in risk assets. I dont think equities make new lows but Im not sure of that. Same with crypto.
Personally, I think we get saved by weak economic data this week. pic.twitter.com/tzpMPmTg5X
— Raoul Pal (@RaoulGMI) August 29, 2022
While in 2021 Bitcoin, other virtual currencies, and stocks rallied, 2022 became a challenging year for risk assets. Central banks started to raise interest rates as inflation reached the highest level in decades around the world.
In this thread, Raoul Pal explained that if the dollar continues to move in its parabolic trend, then things could get worse. In the charts he shared, he explained that the DXY index could hit 120, the highest level in years. According to what he wrote, it is possible for the DXY index to hit that level in the future.
On Twitter, Raoul Pal wrote:
“It could cause a nasty week in risk assets. I don’t think equities make new lows, but I’m not sure of that. The same with crypto. Personally, I think we get saved by weak economic data this week.”
Highest Interest Rates Possible
It is worth taking into consideration that central bankers from all over the world met last week on Friday at Jackson Hole, Wyoming. They made clear that they could embrace higher interest rates in the coming months if inflation does not peak or stabilize at current levels.
Eurozone inflation hit in August a new record high. Inflation rates beat expectations by surging to 9.1% from 8.9% the previous month. Let’s not forget that the European Central Bank (ECB) has anchored its inflation target at 2%, which is far from the current levels.
The ECB could raise interest rates in the future if they do not see inflation rates moving lower or stabilizing. It is also worth mentioning that the main drivers for inflation included food and energy, both in double-digit territory.
Things could get worse when the heating season starts as energy prices could continue to move higher. Additionally, the underlying inflation has also soared. It might be possible to see inflation levels getting closer to 10% in the next months all around Europe.
A hike in interest rates could get higher in the Eurozone in the coming months. At the moment, the ECB has hiked interest rates for the first time in years to 50bps. Nevertheless, this seems not to be very efficient to stop inflation. Therefore, higher interest rates are possible for European countries and the United States in the near future.