Bitcoin traders braced for inflation-based volatility after BTC price action preserved key weekly support around $82,500.
Bitcoin (BTC) starts the third week of October by defending support at $82,500 ahead of key US inflation data.
US inflation data is in traders’ crosshairs this week ahead of the Federal Open Market Committee’s Oct. 28 meeting on interest-rate policy.
The September prints of the Consumer Price Index (CPI) and Producer Price Index (PPI) will be released on Wednesday and Thursday, respectively.
In August, CPI broadly conformed to expectations at 3.4% year-on-year, with markets now seeing an uptick to 3.7% this month on the back of ongoing military action in the Middle East and associated fuel-price surges. PPI is expected at 0.3% month-on-month versus 0.2% in August.
US CPI 12-month % change by category. Source: Bureau of Labor Statistics
Crypto, stocks and gold traditionally benefit from lower-than-expected inflation readings as these reduce the odds of the Fed tightening policy, allowing for capital inflows to strengthen. Speaking to Reuters about current gold prices and US bond yields, Tim Waterer, chief market analyst at KCM Trade, drew attention to the impact of a surprise move to the downside for CPI and PPI readings in particular.
“In the short term, a cooler-than-expected US inflation reading would be the clearest near-term catalyst, as it would reduce the odds of further Fed tightening and ease pressure on real yield,” he said.
CME FedWatch shows that markets see just an 18.8% chance of a rate hike on Oct. 28 from the current 3.75-4.00% range. The following meeting, in December, is attracting 70.6% odds of the Fed hiking by 25 basis points to 4.00-4.25%.
Fed target-rate probabilities (screenshot). Source: CME Group
Fed chair Kevin Warsh is due to hold a discussion with Kristalina Georgieva, managing director of the International Monetary Fund (IMF), at an event in Bangkok, Thailand on Friday.
US bond yields have come off 24-year highs seen last week, with the 10-year and 30-year yields at 5.24% and 5.60%, respectively, on Monday.
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