In the United States, inflation data for June were significantly lower than expected, and the market's bets on the Fed's interest rate hike this month cooled rapidly. Following the release of the data, Bitcoin expanded its daily increase to approximately US$ 63,400, reflecting the sensitivity of risk assets to expected changes in interest rates.

June CPI was below expectations

The consumer price index (CPI) ring ratio declined by 0.4 per cent in the United States in June, weaker than the previous expected decline of 0.1 per cent for economists and significantly lower than the 0.5 per cent ring increase in May.

In comparison, CPI rose by 3.5 per cent in June, below the market expectations of 3.8 per cent and 4.2 per cent in May. The core CPI after the elimination of food and energy was even in June, when the market was expected to rise by 0.2 per cent; in May, the indicator rose by 0.2 per cent.

The core CPI rose by 2.6 per cent over the same period, again below the expected 2.9 per cent and by 2.9 per cent in May. This group of data means that inflationary pressures have significantly eased in the recent past compared to the previous month.

  • CPI ring ratio: 0.4 per cent decrease
  • CPI ratio: 3.5 per cent increase
  • Core CPI to year: up 2.6%

The interest rate increase is expected to cool down in July

Prior to the release of this data, the market expected a rapid increase in interest rates at the July meeting of the Federal Reserve. It was mentioned that Federal Reserve Board member Chris Waller had previously indicated that he would prefer to support an immediate increase if the core CPI did not fall.

According to CME FedWatch, the July interest rate rate increase had previously risen to 42 per cent, compared to 8 per cent a month earlier. As core inflation data were lower than expected in June, the market's judgement of short-term interest rates was reversed.

Bitcoin's up.

After the publication of inflation data, bitcoin continued to rise from the previous upwards to $63,400, an increase of approximately 2 per cent for 24 hours. In the current environment, lower-than-anticipated inflation data tend to reduce market concerns about austerity escalation and thereby boost the performance of risk assets, including encrypted assets.

The market will then follow up on Federal Reserve Chairman Kevin Warsh’s testimony to Congress on the economic situation to judge how Fed officials interpret the latest inflation data and whether policy communication will be further adjusted before the July meeting.