Anticipation Builds as Markets Await Release of Core CPI and CPI Data


Tonight, at 10:30 pm AEST (6:30 am US Eastern Time), all eyes in the financial world will be glued to the release of the Consumer Price Index (CPI) and Core CPI data. These figures are among the most crucial economic indicators, guiding the decisions of central banks like the Federal Reserve, and often stirring significant market movements. As anticipation mounts, it’s essential to understand the significance of these metrics and their potential impact on various assets, including cryptocurrencies like Bitcoin.

What is CPI and Core CPI?

CPI, or the Consumer Price Index, serves as a measure of the average change in prices paid by urban consumers for a diverse basket of goods and services. It encompasses essential expenses such as food, housing, transportation, and medical care, offering a broad insight into inflation trends and the purchasing power of the currency.

On the other hand, Core CPI is a variant of CPI that excludes volatile elements such as food and energy prices. This exclusion helps economists and policymakers gauge underlying inflation trends more accurately, as food and energy prices tend to fluctuate more widely due to factors like weather patterns and geopolitical events.

Core CPI & CPI Charts

Market Expectations and Bitcoin’s Response

The market sentiment regarding tonight’s CPI data release is diverse, with various stakeholders having different expectations. Analysts anticipate the CPI to rise by approximately 3.40% – Such a figure would signify a continuation of the recent inflationary trend, which has been a cause for concern among investors and policymakers alike. In the cryptocurrency realm, particularly for Bitcoin, inflationary pressures can have varied effects. This is because Bitcoin is viewed as an inflation hedge and risk asset simultaneously.

Historically reliable correlations would suggest a CPI figure higher than expected could be bullish for the US Dollar (DXY) but bearish for risk assets like Bitcoin, especially if there’s a strong spike. Conversely, a lower-than-expected CPI figure might be bearish for the US Dollar but bullish for risk assets.

Bitcoin has at times shown tendencies to behave as both a risk-on and risk-off asset, meaning its price can respond positively or negatively to macroeconomic indicators like inflation. Tonight’s CPI data release comes at a critical juncture for Bitcoin, which is hovering near the significant resistance level of $73,000. The outcome of the CPI announcement could either catalyze a breakout towards $82000 or trigger a correction to $61000, depending on market interpretation.

Bitcoin/USDT 3 Day Chart

Interest Rates and Bond Yields

Moreover, the CPI figures will play a pivotal role in shaping expectations regarding interest rates, especially in the United States. The Federal Reserve closely monitors inflation data to inform its monetary policy decisions, including adjustments to the benchmark interest rate. The Fed’s recent omission of their decision to cut rates this year makes each data print extremely important to understand when liquidity will flow into the market. Higher-than-expected inflation could prompt the Fed to consider tightening monetary policy (raising interest rates) sooner than anticipated, potentially leading to an increase in bond yields.

Interest Rate Expectations for May’s FOMC Showing a 96% Probability of No Change

For investors, particularly those involved in fixed-income securities like US Treasury bonds, changes in interest rates can have significant implications. The 2-year US bond yield, in particular, serves as a barometer for market sentiment regarding short-term interest rate expectations. Therefore, any deviation from consensus CPI figures could spark volatility in bond markets, influencing broader asset classes, including Bitcoin. Currently, this chart is trading within a channel between 4% and 5% after breaking a decade-long downtrend in 2021. A critical test for the larger macro markets is if this rallies to 5%.

US 2-Year Government Bond 3-Day Chart

Conclusion

In conclusion, tonight’s release of CPI and Core CPI data carries substantial weight for financial markets globally. Beyond merely reflecting inflationary trends, these figures have the potential to shape central bank policies, interest rate expectations, and investor sentiment across various asset classes. For Bitcoin enthusiasts and traders, the outcome of the CPI announcement could signal the next phase of price action, potentially propelling the cryptocurrency towards new highs or prompting a period of consolidation. As the clock ticks towards 10:30 pm AEST, market participants brace themselves for a pivotal moment that could set the tone for the days and weeks ahead.

Related Articles

Responses

image-popup
image-icon
UPGRADE YOUR SUBSCRIPTION
UNLOCK THIS CONTENT & MORE WITH OUR FREE 7 DAY TRIAL
START MY FREE TRIAL
*Trial requires a credit or debit card and gives you 7 days free access to all features of our platform, then $250.00AUD per month until cancelled. Cancel any time.