Bitcoin spiked to a new August high into Sunday’s weekly close as market participants turned their attention to the next US inflation reports.
Bitcoin starts the week with new August highs as traders weigh the impact of crunch US inflation data.
Key US inflation data is due as markets shift their expectations of Federal Reserve interest-rate policy.
The July prints of the Consumer Price Index (CPI) and Producer Price Index (PPI) will be released on Wednesday and Thursday, respectively.
The timing of the release is important — recent US inflation cues have given mixed signals to Fed watchers, while resolution of the US-Iran war likewise remains far from certain. The latter has implications for CPI in particular, given oil’s price sensitivity to events around the Strait of Hormuz shipping route.
“Crude oil prices remain caught between opposing forces, as markets assess the possibility of a breakthrough over the Strait of Hormuz against Iran’s conditions for reopening the strategic waterway,” Sugandha Sachdeva, founder of New Delhi-based research company SS WealthStreet, told Reuters on Monday.
CFDs on US WTI crude oil one-hour chart. Source: Cointelegraph/TradingView
Last month’s CPI and PPI results both surprised to the downside, with the former seeing its largest monthly decline since April 2020. Nonfarm payrolls numbers last week continued the trend, showing weaker-than-expected labor-market conditions.
Both bolstered odds of a more dovish Fed going forward, with markets switching from a 0.25% rate hike probability to a continued pause as the most likely outcome at its Sept. 16 meeting. CME Group’s FedWatch Tool showed a 56% chance of a pause as of Monday.
“A week ago, market-implied odds strongly favored a rate hike at the Fed’s next meeting in September. Those odds now slightly favor the Fed keeping rates on hold, with just one hike before pausing well into next year,” trading resource Mosaic Asset Company wrote in the latest edition of its newsletter, The Market Mosaic.
Fed target rate probability comparison for September FOMC meeting (screenshot). Source: CME Group
Mosaic added that last week’s ISM Manufacturing and Services data pointed to the US economy “holding up just fine,” despite the data sparking concerns over signs of future “stagflation” — rebounding inflation gauges combined with slow economic growth and rising unemployment.
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