Consumer Price Index (CPI) data has an impact on both traditional global asset markets and digital asset markets. The Federal Reserve will decide whether to further tighten monetary policy based on CPI statistics that have yet to be released.
According to data from TradingView, the BTC/USD pair could not rise above $21,800 before the release of the US CPI statistics for January.
Impact on Stock and Crypto Markets of Inflation Data
Economists forecast that the headline CPI would have risen 0.5% month-on-month in January, a sizeable increase from recent months. On February 10, the Bureau of Labor Statistics issued new seasonal adjustments that changed December’s initial monthly decline in headline inflation from 0.1% to an increase of 0.1% in the last month of the year.
According to experts, the core CPI will have risen 5.5% in the last year, a small decrease compared to the increase of 5.7% observed in December.
While the headline CPI was mainly affected by unpredictable energy costs this year, policymakers pay more attention to core inflation as it offers a detailed view of essential components such as housing. According to Chairman Powell, a key element in deciding the direction of interest rates is safe haven inflation, which has remained stubbornly high.
Powell predicted that housing inflation would begin to fall mid-year in a recent interview in Washington, DC According to Powell, who spoke last Monday at the Economic Club of DC, “There has been an expectation that [inflation] it will disappear quickly and painlessly; I don’t think I’m sure that’s the base case.” There will be a delay.
Markets will take a headline and core reading of more than 6.7% and 5.7%, respectively, indicating that the Federal Reserve will need to raise rates more quickly this year.
When one examines past responses to the US CPI print, we find that in 179 CPI prints over 15 years, the USD has risen on average after CPI prints. Therefore, high CPI readings will have seasonal support for USD strength and a downtrend for EUR/USD on press day.
Was the CPI data set to affect the BTC price?
The STOXX Europe 600 Index closed on February 13 up 0.9%, according to CPI statistics. Meanwhile, Asia-Pacific markets gave mixed signals on Tuesday. When the appointment of Kazuo Ueda as the new governor of the Bank of Japan was announced, Japan struck an optimistic tone.
By contrast, US stock futures fell as investors anticipated crucial inflation data. Investors are hesitant to predict the future due to a huge wave of inflation.
But the global market for digital assets turned green a few hours before the CPI figures were released. The market capitalization grew by 1.5% during the next 24 hours after the launch. Currently, it is worth $1.01 trillion. The prices of major cryptocurrencies, including BTC and ETH, saw a small rally in the same time frame.
BTC Price Action After CPI Data Figures
January’s m/m CPI data rose 0.5%, as forecast by economists. However, on an annual basis, inflation was somewhat higher than anticipated, standing at 6.4% in January compared to 6.5% in December and the forecast of 6.2%.
Investors awaited the release of US CPI data. In its most recent market update, trading firm QCP Capital raised concerns about variables as well as statistics. He claimed that the legal action currently being taken against blockchain startup Paxos, which publishes stablecoin Binance, could only be the beginning of US regulatory policy.
The core CPI, which does not include food and energy prices, increased by 0.4% in January, in line with forecasts and keeping December’s data constant. In January, the year-on-year core CPI was 5.6% versus 5.5% expected, down from 5.7% the previous month.
Following the disclosure, the BTC price fell by around $100. BTC then rallied, breaking through the $24,000 resistance level on Feb. 16.
Traders closely monitor the rate of inflation, which is still high but has been declining for some time. The US Federal Reserve may stop its rate-raising cycle if the economy continues to slow, but this news indicates more work needs to be done.
