What’s next for bitcoin and USD after CPI data

On Feb 16, 2023

The Consumer Price Index (CPI) data has an impact on both the traditional global asset markets and the digital asset markets. The Federal Reserve will decide whether to tighten monetary policy further based on the yet-to-be-released CPI statistics.

According to TradingView data, the BTC/USD pair could not rise beyond $21,800 before the January U.S. CPI statistics release.

BTCUSD, 4-hour price movement. Source: Tradingview data

Impact on the Stock and Crypto Markets from Inflation Data

Economists predicted that the headline CPI would have increased 0.5% month over month in January, a considerable increase from recent months. On Feb. 10, the Bureau of Labor Statistics issued new seasonal adjustments that changed the initial monthly decline in headline inflation for December from 0.1% to an increase of 0.1% in the final month of the year.

According to experts, the core CPI will have increased 5.5% over the last year, a little decline from the 5.7% increase seen in December.

While the headline CPI has been primarily impacted by unpredictable energy costs this year, policymakers pay closer attention to core inflation since it offers a detailed look at essential components like housing. According to Chair Powell, a key element in deciding the direction of interest rates is shelter inflation, which has stubbornly remained high.

1/4. The decline in U.S. stocks did not significantly affect the rebound in the crypto market. BTC and ETH prices have risen considerably, but investor expectations have not improved with the rebound in spot prices. pic.twitter.com/VP8autCd7d
— Blofin Academy (@Blofin_Academy) February 15, 2023

Powell predicted that housing inflation would start to drop by the middle of the year in a recent interview in Washington, D.C. According to Powell, who spoke last Monday at the Economic Club of D.C., “There has been an expectation that [inflation] will go away swiftly and painlessly; I don’t think it’s assured that’s the base case.” There will be a delay.

The markets will perceive 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 previous responses to the US CPI print, we find that across 179 CPI prints in 15 years, the USD has increased on average after CPI prints. Therefore, high CPI readings will have seasonal support for the USD’s strength and a downward trend for the EUR/USD on the print day.

Was CPI data set to affect BTC price?

The STOXX Europe 600 index ended Feb. 13 0.9% higher, according to CPI statistics. Asia-Pacific markets, meanwhile, gave conflicting signals on Tuesday. When Kazuo Ueda’s appointment as the new governor of the Bank of Japan was announced, Japan struck an upbeat tone.

In contrast, American stock futures declined as investors anticipated crucial inflation data. Investors are hesitant to predict the future due to a large wave of inflation.

But the global digital asset market turned green a few hours before the CPI numbers were released. The market capitalization grew by 1.5% over the next 24 hours after the release. Currently, it is worth $1.01 trillion. The prices of the most significant cryptos, including BTC and ETH, experienced a little uptick in the same time frame.

BTC price action after CPI Data figures

The January CPI m/m Data increased by 0.5%, as predicted by economists. However, on an annual basis, inflation was somewhat higher than anticipated, coming in at 6.4% in January compared to 6.5% in December and the 6.2% forecast.

Investors expected the release of the US CPI Data. In its most recent market update, trading company QCP Capital expressed worries over variables besides statistics. It stated that the legal actions currently being taken against Blockchain startup Paxos, which publishes the Binance stablecoin, could only be the beginning of U.S. regulatory policy.

The core CPI statistics, which do not include food and energy prices, increased by 0.4% in January, in line with forecasts and maintaining a constant from December’s figure. In January, the year-over-year core CPI was 5.6% compared to the 5.5% forecast, a decrease from the 5.7% recorded the previous month.

Following the revelation, the price of BTC dropped by about $100. BTC later rallied, breaking the $24,000 resistance level on Feb. 16..

The inflation rate, which is still high but has been declining for some time, is closely monitored by traders. The U.S. Federal Reserve may be able to halt its rate rise cycle if the economy continues to slow down, but this news indicates that more work has to be done.

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