On Wednesday, June 10, the US inflation reading is either a floor or a trapdoor for Bitcoin and gold investors.
The US Consumer Price Index (CPI), the monthly measure of inflation across the economy, is a key indicator for several markets to watch on Wednesday.
Another Fed Signal
There is now a 70% chance of a Federal Reserve rate hike by December, up significantly over the past week, after the May jobs report added 172,000 positions, beating the forecast of 85,000.
Bitcoin trades at $62,747, down from $82,000 at its May peak. Gold sits near $4,330, its lowest since late March. Both assets have moved lower as rate-cut expectations flipped to rate-hike expectations.
FED RATE HIKE BETS RISE AS DATA STRENGTHENS
Schwab’s Collin Martin says stronger U.S. jobs data and persistent inflation are lowering the bar for a Federal Reserve rate hike, with markets now pricing in potential tightening by year-end. He expects an extended pause but warns the… pic.twitter.com/MI5xxnjMcv
The Federal Reserve targets 2% inflation. The current CPI is 3.3%, according to the latest Bureau of Labor Statistics (BLS) data, above the Fed’s target.
A CPI reading above analyst expectations would push rate hike odds above 80%, up from 70% currently. Both Bitcoin and gold suffer when rates rise: higher rates make yield-generating assets, such as Treasury bonds, more attractive compared to assets that pay no yield.
What if the Numbers Come in Lower?
A softer CPI reading reduces the urgency of a rate hike and removes the primary pressure pushing both assets lower. For gold, the case Wall Street’s biggest banks have built around $5,400-$6,300 year-end targets, depending on inflation cooling toward the Fed’s target. A lower print reveals the thesis.
For Bitcoin, the May sell-off traced to the collapse in rate-cut expectations, specifically the assumption that easy monetary policy would return. A softer inflation number partially restores that assumption.
The Bureau of Labor Statistics publishes CPI data at 8:30 AM Eastern on Wednesday. Bitcoin at $62,747 and gold at an 11-week low are both priced for uncertainty. One number resolves it, in one direction or the other.
