The global market maintained a wait-and-see attitude on Wednesday, waiting for the release of the US Consumer Price Index (CPI) for December at 9:30 pm Taiwan time tonight, to assess the direction of the Federal Reserve's policy. If the data is still higher than expected, it may reduce the possibility of the Federal Reserve further cutting interest rates.
According to data from MarketWatch, the expected year-on-year CPI growth rate will reach 2.9% and the month-on-month growth rate will be 0.3%. The core CPI excluding food and energy is expected to increase by 0.3% month-on-month, and investors can judge based on this.
The inflation indicator most closely watched by the Federal Reserve
Reuters reported that the market expects the core CPI to increase by 0.2% month-on-month, but the risk is tilted to the upside. If the data is strong, reaching 0.3% or higher, it may lead to another sell-off in global stocks and bonds. JPMorgan Chase pointed out in a report to clients:
This CPI data is a critical turning point. If the data is dovish, it may reignite the market rally, driven by a strong earnings season. If the data is hawkish, the 10-year US Treasury yield may approach 5%, which will increase the volatility of all asset classes and continue to put pressure on the stock market.
Just last night (January 14), the data on the US Producer Price Index (PPI) for December showed a year-on-year increase of 3.3%, a new high since February 2023, but lower than the market's previous expectation of 3.4%. The month-on-month increase of 0.2% was also lower than the market's previous expectation of 0.3%, which suppressed the US dollar trend and caused short-term US bond yields to retreat from their highs, providing temporary support for US stocks and Bitcoin.
However, the market still expects the Federal Reserve to only cut interest rates by 29 basis points this year, with the first rate cut expected to be launched in September. In addition, the 10-year US Treasury yield rebounded last night after the PPI data, closing down 0.29% at 4.774%, slightly lower than the high of 4.809%.
How will it affect the Bitcoin trend?
Ryan McMillin, Chief Investment Officer of cryptocurrency fund management company Merkle Tree Capital, said that the latest PPI data, although still rising, was lower than expected, and the CPI data may show a similar result, which would suggest that the US dollar may have peaked and risk assets will have some breathing room.
Ryan McMillin added that this is in line with the confirmation of cabinet nominees this week and the Trump team's plan to weaken the US dollar and cut interest rates, not only short-term rates, but also long-term rates like the 10-year US Treasury:
This may take some time to calm the stock market, but with the Trump team officially announcing its support for Bitcoin and cryptocurrencies, the Bitcoin and cryptocurrency markets are likely to see an immediate upswing.
However, CryptoQuant warned that the CPI data on Wednesday could have a significant impact on market sentiment, and if the data deviates from expectations, it could change the Federal Reserve's interest rate path and affect the Bitcoin trend.
