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Bitcoin’s Price Response to Soft Inflation and FOMC Rate Pause, PPI Expected

Bitcoin’s Price Response to Soft Inflation and FOMC Rate Pause, PPI Expected

Bitcoin’s price has been on a rollercoaster ride, influenced by key economic data and Federal Reserve decisions. This week saw significant movements as traders reacted to the Consumer Price Index (CPI) data and the Federal Open Market Committee’s (FOMC) decision to pause rate hikes. Let’s explore how these events impacted Bitcoin and other key financial markets.

Bitcoin’s Price Surge Amid Economic Data

Bitcoin’s price soared higher on Wednesday, rebounding from a decline in the prior session. The anticipation of a Federal Reserve meeting and key inflation data had constrained risk appetite.

The world’s biggest cryptocurrency jumped 3.5% in the past 24 hours to $69,367.6 by 08:40 ET (12:40 GMT). It had fallen as low as $66,000 on Tuesday. The volatile swings in Bitcoin’s price were a response to rate jitters and shifting sentiment towards cryptocurrencies.

BTCUSD 4-hour Chart

Bitcoin's Price Response to Soft Inflation and FOMC Rate Pause, PPI Expected

CPI Data and Bitcoin’s Reaction

The U.S. Consumer Price Index (CPI) was flat in May, beating economist forecasts for a 0.1% rise and down from 0.3% in April. On a year-over-year basis, CPI was up 3.3%, compared to analyst forecasts and the previous month’s reading at 3.4%. The core CPI, which excludes food and energy costs, rose 0.2% in May, better than forecasts for a 0.3% rise and versus 0.3% in April.

Bitcoin welcomed the soft inflation read, jumping to $69,400, up nearly 4% over the past 24 hours. The cooling inflation raised optimism that the U.S. economy will head into a soft landing, avoiding a full-blown recession in 2024.

FOMC Rate Pause and Its Impact on Bitcoin

On Wednesday, June 12, 2024, Bitcoin’s price surged 6% following the dovish outcome of the U.S. Federal Reserve’s fourth FOMC meeting of the year. The Fed’s decision to pause rate hikes sparked positive reactions among crypto investors. The bullish activity was not limited to spot markets alone, as critical BTC derivatives market data suggested more upside could follow.

EUR/USD Response to Economic Events

The EUR/USD pair remained stable following the trimming of losses registered in the previous session. The pair trades around 1.0810 during the Asian hours on Thursday. The U.S. Dollar continued its strong retracement on Wednesday, this time on the back of disheartening U.S. inflation figures tracked by the CPI in May.

It was all about the U.S. CPI and the FOMC event on Wednesday, as EUR/USD seems to have temporarily set aside fresh political concerns in Europe. ECB Vice President de Guindos argued on Wednesday that the bank should proceed “very slowly” with reducing interest rates due to considerable uncertainty surrounding the inflation outlook.

GBP/USD Trades with Mild Losses

The GBP/USD pair drifted lower on Thursday amid the hawkish Fed-inspired USD buying interest. Despite the U.S. Dollar’s resilience, the pair managed to hold its ground as the sharp decline seen in EUR/GBP showed that Pound Sterling captured capital outflows out of the Euro.

The pair continues to stretch higher and trades at around 1.2750 as market attention shifts to key macroeconomic events from the U.S.

Gold Price Faces Selling Pressure

Gold prices met with fresh supply during the early European session on Thursday and snapped a three-day winning streak to a fresh weekly peak, around the $2,341-2,342 region touched the previous day. The Federal Reserve’s hawkish surprise on Wednesday overshadowed softer U.S. consumer inflation figures.

The shift in the Fed’s projections pushed U.S. Treasury bond yields higher, assisting the U.S. Dollar to build on the overnight bounce from a multi-day low. This further undermined the U.S. Dollar-denominated gold price, though geopolitical tension in the Middle East and renewed political uncertainty in Europe could help limit deeper losses.

USD/JPY Advances Amid Fed’s Hawkish Hold

The Japanese Yen retraced its recent gains on Thursday as the U.S. Dollar advanced following a hawkish hold from the U.S. Federal Reserve. The USD/JPY pair bounced off daily lows at around 155.80 and edged above the 156.00 figure, but it was capped by the 100-Simple Moving Average (SMA) at 156.55.

The Federal Reserve’s monetary policy statement highlighted that officials do not expect it will be appropriate to reduce the target range until inflation moves sustainably toward 2 percent. The Summary of Economic Projections (SEP) revealed that policymakers tilted slightly hawkish, with the federal funds rate expected to end at 5.10% in 2024.

These developments have significant implications for both the Yen and the broader market dynamics, showcasing the far-reaching impact of U.S. economic policy decisions on global currency markets.

Disclaimer:

All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance.

Author

  • Zahari Rangelov

    Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.

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