Arguably, the single-most important event on this week’s macroeconomic calendar is the release of the July US consumer price index (CPI), due tomorrow (Wednesday, August 10th).
The year-on-year advance in headline inflation is expected to moderate down to 8.7%, compared to June’s 9.1%.
However, markets are well aware that the official CPI print had exceeded market expectations in 5 out of the last 6 months.
Another higher-than-expected US CPI figure could well ramp up market expectations for more jumbo-sized rate hikes by the US Federal Reserve at its remaining 3 meetings scheduled before year-end.
At the time of writing, markets already accord a 75% chance of another 75 basis point hike at the FOMC’s September meeting.
If so, that would mark a hattrick of successive rate hikes of such a massive quantum – with 75bps being three times larger than the customary 25bps adjustments traditionally incurred by major central banks at each policy meeting.
Typically, risk assets shudder at the thought of interest rates spiking higher.
However, Bitcoin has been able to hold its own of late, apparently already well-versed with such a narrative.
Bitcoin rose despite better-than-expected US jobs report
Take for instance Bitcoin’s performance following last Friday’s blowout US jobs report.
The headline nonfarm payrolls (NFP) figure came in at 528,000 – which is more than double economists’ median estimate of 250k. The idea is that a resilient US labour market would be able to withstand the dampening effects of higher interest rates, thus paving the way for the Fed to press on with its aggressive inflation-fighting campaign.
Yet, Bitcoin hardly bristled at such a thought.
The world’s largest cryptocurrency went on a four-day winning streak, including the 2.1% advance last Friday - the day of that NFP release. Though at the time of writing, the world’s largest cryptocurrency is apparently taking a break, easing back below the $24,000 mark.
Though to be clear, Bitcoin remains some 65% below its ATH (all-time high), using intraday prices, set back in November.
It still has a long way to go before revisiting the glory days of Q4 2021.
US CPI print set to dictate markets’ next move
For our immediate attention, it remains to be seen whether Bitcoin has enough wherewithal to shrug off another hotter-than-expected CPI print.
On a more consolatory note for Bitcoin bulls, a lower-than-expected CPI print tomorrow which suggests that US inflation has peaked is likely to embolden crypto prices on the premise that the worst of the Fed’s battle against skyrocketing consumer prices may be behind us.
Ultimately, time will tell whether the gains since mid-June were but part of a bear market rally, or whether Bitcoin has truly found its bottom in this cycle.