Last week brought significant turmoil on financial markets, including on the cryptocurrency market. All by unexpectedly high data on manufacturers’ inflation (PPI), which increased by 0.9% month to a month, while analysts expected only 0.2% growth. This inflationary leap for the first time in a long time showed the real influence of duties on the American economy and questioned the fed’s plans regarding interest rates.
Inflation data is surprising markets
Thursday publication of PPI data surprised even the most experienced analysts. A monthly increase of 0.9% significantly exceeded economists’ forecasts and a previous result at 0.0%. This unexpected value immediately translated into the reaction of the markets – risky assets, especially cryptocurrencies, began to lose value, while the profitability of 2 -year treasury bonds jumped from 3.65% to 3.75%.
The key aspect of this reading was that for the first time the significant impact of duties on the price level was observed. The increase in producers’ inflation was driven by both goods and services. Earlier, economists assumed that producers would not translate most of the costs into consumers, fearing that the weakened purchasing power of society would not bear additional price burdens. However, current data suggest that manufacturers are starting to transfer some costs to the final recipients.
This raises concerns that inflation may soon arise in the CPI data, which could effectively disturb the cycle of interest rate reductions expected by markets by a federal reserve.
The market is still counting on the September reduction
Despite the disturbing inflationary data, the market still values 83.1% of the probability of foot reduction by the FED at the meeting in mid -September. This relatively high certainty, however, can be put to the test during the next speech of Jerome Powell as a symposium in Jackson Hole.
Jackson Hole is of particular importance in Fed communication, because it is there that the chairman often announces key changes in monetary policy. Powell’s memorable speech from 2022, in which he talked about “pain” necessary to tame inflation, still affects the perception of his communication by investors.
In recent statements, Powell showed caution in the face of commitment to instant foot reductions, arguing by the expectations of analysts regarding the increase in inflation in the summer months due to customs. Although the data from last week confirms these fears, the Fed faces a gentle balance between growing inflation and a deteriorating labor market.
Bitcoin’s technical analysis is concerned
From the perspective of technical analysis, Bitcoin is currently at a key moment. If the price does not make up and permanently loses the main horizontal support at USD 116,600 and a key upward trend line (which has been intact from April), it will be a pessimistic signal for investors.
In addition, the Bitcoin Heater indicator from Capriole had previously shown overheating the financial lever on the market, which suggested the need for caution. Although this indicator returned to medium levels after a price drop from 123,000 to $ 115,000, it does not constitute a signal to significantly reduce exposure, but rather warnings against excessive risk increasing.
The behavior of the ETH/BTC pair, which has reached the level of main horizontal resistance and may soon start consolidation or correction. At the same time, the structure of the Bitcoin domination chart suggests the possibility of reflection if the price returns above 60%. It would be a tragic “fake” Altsason for many investors.
Institutional investors drive demand
It is interesting that the last price increase was mainly driven by companies with Bitcoin in their treasures. The data show that they were responsible for most demand, while the interest of ETF funds clearly weakens.
This trend can be particularly important in the context of the potentially Jastrzębie speech by Powell. If the Chairman of the FED adopts more restrictive rhetoric, and at the same time reduces the activity of treasury companies, this could become a catalyst for a new wave of declines on the cryptocurrency market.
Scenarios for the coming weeks
The base scenario of analysts remains the opening of Powell to the September reduction of the feet, but depends on the further weakening of the labor market. We will know key data in this area in the first week of September.
If Powell actually confirms readiness to reduce when specific conditions are met, risky assets can stabilize and even gain value. However, due to the fact that the September reduction is already highly valued by the market, the space for significant increases may be limited.
The risk is a scenario in which the Chairman of the FED will emphasize its original careful attitude and justifies the decision to maintain the current feet in the light of the latest PPI data. Such a development of accidents would drastically reduce the likelihood of the September reduction and probably caused further sale of risky assets.
Currently, the strategy of many investors focuses on the main cryptocurrencies and selected memecoin tokens, with caution against a wider portfolio. The exposure can only be extended after confirming the start of the foot reduction cycle, which is historically conducive to the “everything up” environment on the financial markets.
The next days will be crucial to determine the further direction for both Bitcoin and the entire cryptocurrency market. Investors eagerly expect Powell’s Friday speech, which can decide on the short -term perspectives of this dynamic sector.
