Last Updated: 11 August 2022
Today is a big day for bitcoin. As at 14:30, the U.S. Bureau of Labor Statistics will announce the new U.S. consumer price index. In recent times the publication of these figures has had a major impact on the bitcoin price, so this Wednesday could prove to be an important day for bitcoin.
CPI prints have been pretty pitoval for BTC price action. Big day tomorrow innit. pic.twitter.com/xUUTAhd0Lf
— Will Clemente (@WClementeIII) August 9, 2022
What is the expectation?
If FactSet‘s research is to be believed, US inflation fell from 9.1 to 8.7 per cent in July. That is roughly where the market expects it to go today. If we do indeed end up at that 8.7 percent, then the expectation is that the bitcoin price will have little to no reaction to that.
“The expectation is that the CPI will be lower than last month, but I think that given the strong economic data last week (the jobs numbers) it is premature to predict an interest rate cut from the Federal Reserve at this time,” said Dick Lo of TDX Strategies.
Last week, the American jobs report that showed that the unemployment rate in the United States fell by 0.1 percent to 3.5 per cent came out. That is the lowest reading in ages, which means that, at least, on this front, the economy is in very good shape.
This gives the Federal Reserve room to further raise interest rates without immediately killing off the economy. Even if inflation is slightly lower than expected, analysts see little chance of a rally. The only thing that might help is if we get an extremely low inflation print.
Market expects interest rate cuts before 2023
Despite the fact that the Federal Reserve seems to have more room than expected to raise interest rates, the market does not believe it can sustain this for a long time. Indeed, the bond market is pricing in rate cuts from the Federal Reserve starting in early 2023.
This means that bond market traders feel that the Federal Reserve has little or no room for manoeuvre to raise interest rates further or to keep them at this level for a long time. The job market may be strong at the moment, but that does not change the massive debt mountain the United States is facing.