How will U.S. CPI figures reshape the crypto market and the Fed's policy? | Credit: Spencer Platt/Getty Images
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Key Takeaways
Bitcoin fell under $118,000 as traders locked in gains ahead of July CPI, with broader risk assets also easing.
Median estimates point to a 0.24% headline monthly inflation and a 2.8% annual one.
Markets currently price a 90% chance of a September rate cut and 50% odds of three cuts this year.
With Wall Street bracing for fresh inflation numbers, traders in both traditional and digital markets are trimming risk.
The July CPI release has become the week’s defining event. Its outcome is expected to shape Federal Reserve policy and, by extension, the trajectory for Bitcoin and other risk assets throughout the year.
U.S. CPI numbers for July are due today, and the crypto market has already rolled back some of its recent gains in anticipation.
Traders appear to be positioning cautiously, aware that the data could set the tone for the Fed’s interest rate path and risk asset sentiment.
Bitcoin (BTC) fell on Tuesday, reversing weekend gains as risk appetite soured ahead of key U.S. inflation data, overshadowing optimism over potential regulatory wins.
The token slid by 3.0% to $118,000, retreating alongside other risk assets.
Markets will also watch for signs that President Donald Trump‘s tariffs impacted prices, though August data may provide clearer clues.
Core CPI: +0.31% on a monthly basis, +3.1% on an annual basis.
For comparison, June’s CPI was 0.29% month over month, and the core was 0.23%.
For today’s figures, forecasts vary: Barclays sees headline at 0.29% m/m and 2.7% y/y; Goldman Sachs projects 0.27% and 2.8%; TD Securities is at the high end for core at 0.33%, while UBS is the highest at 0.35%. Jefferies expects just 0.17% m/m headline, with Employ America also low at 0.20%.
Market Scenarios & Likely Reactions
Expectations among Wall Street banks. | Credit: The Wall Street Journal
CPI Comes in Higher Than Expected
If headline or core CPI tops the 2.8% median, it would suggest inflation remains stickier than markets hope. That could dampen the probability of a September rate cut. Expectations:
Bonds: Yields moving higher as rate cut bets are priced out. Traders may hedge or trim risk assets before the Fed’s communication.
CPI Comes in Lower Than Expected
A softer print — for example, near Jefferies’ 3.0% headline or Employ America’s 0.20% MoM — would reinforce expectations for imminent rate cuts. Anticipated moves:
Crypto: Strong rally in BTC, ETH, and high-beta altcoins.
Equities: Broad risk-on sentiment, led by rate-sensitive sectors.
Bonds: Yields likely to drop sharply. In this scenario, traders might position for upside breakouts, as liquidity conditions would likely improve.
CPI Matches Expectations
If the data falls below the 2.8% headline and 3.1% core annual forecasts, the market reaction may be muted.
Crypto: Prices could chop sideways, reverting to technical levels for direction.
Equities: A slight relief rally is possible if volatility had been priced before.
Bonds: Stable yields. For the next catalyst, traders may shift focus to the following macro data point, such as PPI or FOMC minutes.
Giuseppe Ciccomascolo began his career as an investigative journalist in Italy, where he contributed to both local and national newspapers, focusing on various financial sectors.
Upon relocating to London, he worked as an analyst for Fitch's CapitalStructure and later as a Senior Reporter for Alliance News. In 2017, Giuseppe transitioned to covering cryptocurrency-related news, producing documentaries and articles on Bitcoin and other emerging digital currencies. He also played a pivotal role in establishing the academy for a cryptocurrency exchange website. Crypto remained his primary area of interest throughout his tenure as a writer for ThirdFloor.
