Bitcoin traders prepared to navigate a slew of volatility catalysts as US inflation data and US-Iran war triggers keep risk-assets in an unpredictable state.
Bitcoin (BTC) heads into the end of July juggling volatility catalysts as the Federal Reserve reacts to US inflation.
Attention turns once more to the US Federal Reserve this week, with the Federal Open Market Committee (FOMC), chaired by Kevin Warsh, set to announce its latest interest rate decision on Wednesday, July 29.
A combination of geopolitical tensions and persistent inflation pressures has reshaped expectations for Fed policy and put the possibility of further rate hikes back on the table as the US 2-year Treasury yield climbed to 4.3% last week. The latest data from the CME Group’s FedWatch Tool currently sees a 31% chance of a hike this week, with a hike at the September meeting having odds as high as 50%.
Fed target rate probabilities (screenshot). Source: CME Group
These rate hike expectations were tempered slightly as oil prices dropped 8% in the early hours of Monday as the US and Iran paused strikes. Rate hike odds therefore shifted from 37.4% to 33.7%. Ongoing developments in the Middle East thus continue to introduce volatility into the macroeconomic outlook, even as PPI inflation data released earlier in the month came in below expectations.
Fed target rate probability comparison for July FOMC meeting (screenshot). Source: CME Group
Commenting, trading resource Mosaic Asset Company also noted a pending upward breakout in 30-year bonds. Although the long end of the bond curve now plays a diminished role in funding the US government, this could notionally add to pressure on Warsh as he shapes his language at the post-FOMC press conference.
“The 30-year Treasury yield is also testing a key breakout level once again. In May, the 30-year yield saw a false break above the 5% level which has served as resistance since late 2023,” it summarized in the latest edition of its regular newsletter, The Market Mosaic.
US 30-year bond-yield data. Source: Mosaic Asset Company
Even before the latest turmoil, new Fed chair Warsh had steered clear of dovish language on the economy and kept his post-FOMC statement and press conference notably brief.
“Inflation remains elevated relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy,” he said at the time.
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