Cautious Bitcoin Bounce to Face Inflation Data Hurdles Later This Week

As a crypto investor, I’m excited to share that at the current moment, Bitcoin, the largest cryptocurrency by market cap, is trading at an impressive $62,700 on CoinDesk, marking a 2% increase in value over the last 24 hours. This growth comes despite a dip of only 4% from Friday’s low. Moreover, the broader CoinDesk 20 Index is displaying positive movement as well, with a gain of 1.25% over the same timeframe.

As a crypto investor, I’ve noticed that the demand for spot Bitcoin ETFs has significantly decreased recently, with some days even showing net selling. With this trend continuing, macroeconomic catalysts have become increasingly significant. This was clearly demonstrated during U.S. trading hours on a recent Friday morning, when an unexpected surge in consumer inflation expectations and hawkish comments from Dallas Fed President Lori Logan caused Bitcoin to plummet approximately $3,000 within minutes, falling from the $63,300 mark.

Inflation data on the docket

The most likely influences on the market, be it positive or negative, in the coming days are anticipated to stem from upcoming U.S. inflation reports. Specifically, the Producer Price Index (PPI) is scheduled for release at 8:30 a.m. ET on Tuesday, followed by the Consumer Price Index (CPI) at 8:30 a.m. ET the next day.

As a crypto investor, I prioritize keeping an eye on economic reports that could potentially impact the market. Among these two, the Consumer Price Index (CPI) report holds greater significance for me. Economists predict a 0.4% increase in the CPI for April, consistent with the March growth. The annual rate of headline inflation is anticipated to decrease slightly from 3.5% to 3.4%. Regarding the core CPI, which excludes food and energy prices, experts forecast a 0.3% rise in April compared to March’s 0.4%, with an expected annual pace decrease from 3.8% to 3.6%.

Inflation has surprisingly persisted at elevated levels, disrupting predictions for a string of Federal Reserve interest rate reductions in 2024. So far, no rate cuts have been implemented and markets are now estimating a 11% likelihood that the Fed maintains its current stance throughout the rest of the year based on CME FedWatch data. An imminent inflation report showing further price increases could not only dampen expectations for accommodative monetary policy in 2024, but potentially lead markets to anticipate the Federal Reserve’s next move being a hike in benchmark rates.

Other data and Powell speaks

On Wednesday, the U.S. government is set to release the retail sales report for April. This figure is significant and merits attention given the persistent high inflation and the economy’s lackluster indication of requiring reduced interest rates. Although there has been a slight deceleration recently, employment growth remains robust and consumer spending, as indicated by the retail sales numbers, continues to be strong.

The Economist predicts a modest increase of 0.4% for retail sales between March and April, while adjusting for automobile and gas sales, retail growth is anticipated to be only 0.1%.

At 10 a.m. ET on Tuesday, investors have the opportunity to listen to Fed Chair Jerome Powell as he participates in a conversation with Dutch central bank Governor Klaas Knot during the Foreign Bankers’ Association’s annual meeting in Amsterdam. It’s important to note that Powell may not share his latest views on the economy or monetary policy during this discussion.