Summary:
A soft U.S. inflation report may favor risk assets like Bitcoin.
January's CPI is expected to show a 0.3% increase month-on-month.
Analysts do not foresee significant influence on the Fed's interest rate decisions.
Market metrics indicate higher inflation may persist in the coming months.
A breakout from the $90K-$110K range appears unlikely without additional catalysts.
A soft U.S. inflation report later Wednesday is anticipated to favor risk assets, including Bitcoin (BTC). However, those looking for a dramatic bullish surge may find themselves disappointed.
Key Insights on the Upcoming CPI Report
The Labor Department is set to release January's Consumer Price Index (CPI) report at 13:30 UTC, with expectations of a 0.3% month-on-month increase, a slowdown from December's 0.4% rise. The annualized figure is expected to remain steady at 2.9%.
What to Know:
- The January U.S. CPI report is projected to show limited progress on inflation.
- A soft report could attract bids for riskier assets, but indicators suggest limited upside potential.
- Analysts from BlackRock and RBC do not expect the report to influence the Federal Reserve into rate cuts.
While a potential adjustment in Fed rate cuts could boost BTC, it is unlikely to serve as the sole driver for a breakout from its current range between $90,000 and $110,000. Forward-looking metrics indicate rising inflation in the coming months due to trade war concerns, suggesting the Fed may have a limited window for aggressive rate cuts.
Data from Mott Capital Management indicates that two-year inflation swaps have risen to nearly 2.8%, the highest since early 2023, signaling market expectations of increased inflation.
In summary, although a soft inflation reading might signal a more favorable environment for BTC, the overall market sentiment remains cautious as inflation pressures persist and the Fed maintains a hawkish stance, with expectations of limited rate cuts in the near term.
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