😂 Will Bitcoin Dance on a Soft Inflation Report? Unlikely! 😂

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What to discern amidst the economic ballet:

  • Expect the January U.S. CPI to tiptoe around the issue of inflation with a graceful, if unconvincing, performance.
  • A tender touch from the report may beckon the brave to waltz with riskier assets, yet the sly hints of future inflation keep the champagne corked.
  • BlackRock and RBC stand firm as unyielding chaperones, unlikely to let the Fed cut a rug.

In the grand theater of finance, a gentle U.S. inflation report may serenade risk assets, bitcoin among them. Yet, for those awaiting a grand fireworks display, the show may be a mere sparkler.

The Labor Department prepares to unveil January’s CPI drama on Wednesday at the witching hour of 13:30 UTC. The script hints at a 0.3% rise in the cost of living, a slower pace than December’s flamboyant 0.4%. The annualized figure is poised to echo December’s 2.9% aria.

The core of this economic opera, bereft of the capricious food and energy, is expected to hit a high note at 0.3% monthly, with an annualized score of 3.1%, a semitone lower than December’s.

Should the numbers fall flat, particularly the core, the stage may be set for the Federal Reserve to consider a rate cut encore. This could potentially lower Treasury yields and weaken the dollar, giving risk assets a standing ovation.

Alas, a mere change in the Fed’s rate tune may not be enough to elevate BTC from its current box seat between $90,000 and $110,000.

This is due to the market’s foresight, hinting at a crescendo of inflation, likely brought on by trade war fears, which may limit the Fed’s rate-cutting flourishes.

Data from Mott Capital Management reveals that inflation swaps have reached a crescendo not seen since early 2023. The market, it seems, is preparing for a symphony of rising prices.

In layman’s terms, the ongoing rise in these metrics suggests that inflation’s march towards the Fed’s 2% target has taken a rest, with price pressures poised to conduct a longer, perhaps Trump-tariff-inspired, movement.

Moreover, some investment banks believe that a soft January CPI reading won’t inspire the Fed to change its stern rate guidance. Chairman Jerome Powell’s recent congressional testimony suggests the central bank is in no rush to lower rates.

“We don’t anticipate that inflation’s progress will be a sufficient overture for additional rate cuts,” RBC’s weekly composition noted, adding that January’s report will likely offer limited respite.

BlackRock concurs, stating that persistent services inflation will keep the Fed’s rates from descending into a more dulcet range.

“The January CPI awaits us this week. December’s report, while showing a waning of inflation pressures, still finds wage growth singing a tune too high for comfort. We foresee persistent services inflation compelling the Fed to hold rates at a more elevated pitch,” BlackRock harmonized.

Finally, should the CPI prove hotter than anticipated, BTC may find itself moving towards the lower register of its trading range.

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2025-02-12 09:50