Coinspeaker
Crypto Market Dips Ahead of Critical US CPI Data Report
It appears that the crypto market is in an edgy mode as it awaits the release of the US Consumer Price Index (CPI) report for June. The report, expected to go live at 08:30 ET (12:30 UTC) today, has both analysts and investors speculating about its potential impact on both inflation trends and Federal Reserve policies, thereby causing the market to experience a noticeable downturn.
Market Predictions and Potential Fed Actions Ahead of CPI Report
According to Jesse Cohen, an analyst from Investing.com, there appears to be a general expectation mong major US banks and investment firms. That is, they anticipate a slight decrease in the country’s inflation rate, estimated to fall between 3% and 3.2%. Despite this majority forecast, however, Morgan Stanley begs to differ, offering a more cautious projection. Cohen’s recent X post suggests that Morgan Stanley sees the June CPI reaching 3.5% year-over-year (YoY).
Analysts like Cohen are attaching so much importance to the inflation rate for June. That is because they believe that it would be a major determinant of future Federal Reserve actions. For instance, Cohen is of the opinion that if the inflation rate settles around 3.1%, then there is a high possibility for a Fed rate cut in September. He further wrote in a statement:
“Anything above 3.5% and you can forget about rate cuts in 2024.”
Cohen’s statement reflects the delicate situation of the market at this time. It is a time when even the slightest changes in inflation data could cause great shifts in monetary policy expectations.
Notably, the inflation rate has been on a downward trend in recent months. It dropped from 3.4% in April to 3.3% in May, its lowest level in over three years. This decline caused a market-wide rebound that saw Bitcoin (BTC) surging past the $69,000 mark on June 12, the same day that the May inflation report was released.
Current Market Trends
As today’s CPI data release approaches, the global crypto market cap has declined by 0.58% over the past 24 hours, and was seen standing at $2.14 trillion as of publication. However, this does not exactly come as a surprise.
Past records show that it is not unusual for the crypto market to experience bearish corrections ahead of a CPI report. Interestingly, the same pattern might be playing out yet again.
Bitcoin, the market leader, has slipped 0.88% and is currently trying to settle around $58,200. This sudden dip reflects the cautiousness of investors as they wait keenly to see what the forthcoming inflation data will be.
A favorable inflation report, indicating a decrease, could translate to a bullish momentum for the crypto market. Whereas, a higher-than-expected CPI could dampen hopes for near-term interest rate cuts, potentially extending the bearish phase.
