Bitcoin Rally as US PCE Cools to 2.4%, Fed Rate Cuts in June

The U.S. Bureau of Economic Analysis announced the U.S. Federal Reserve’s (Fed) preferred inflation gauge PCE data for January. The PCE in the US went up 0.3% month-over-month in January, the most in four months, following a 0.2% rise in December. Also, the monthly core PCE index, which excludes food and energy, rise to 0.4%, the biggest increase since February last year.

On the other hand, the annual PCE rate fell to 2.4%, the lowest since February 2021, from 2.6% in the previous month. Also, the annual core PCE inflation slowed for 12th straight month to 2.8% from 2.9%.

Wall Street giants including JPMorgan, Bank of America, UBS, Morgan Stanley, Citigroup, Deutsche Bank, Nomura, RBC, Barclays, Goldman Sachs, TD Securities, and Wells Fargo anticipated inflation to cool further.

Amid Wall Street estimates mostly in line with market consensus, Fed Chair Jerome Powell’s expecting three rate cuts in 2024 and Fed officials remaining cautious after CPI, expects predicted rate cuts are likely to happen starting September. The market currently has a 65% chance of Fed rate cuts in June, with March and May off the table. Moreover, the CME FedWatch shows a 51% probability of a 25 bps rate cut in June.

The US dollar index (DXY) moves around 104 on Thursday after facing heightened volatility in the previous session. A PCE in line with expectation could have bets for a rate cut in the first half, helping Bitcoin price to continue its pre-halving rally.

Moreover, US 10-Year Treasury yields (US10Y) pared some gains to trade around 4.28% after the PCE inflation report offered investors some relief about inflationary pressures, and reinforced bets the Fed will start cutting interest rates in the second quarter of the year.  Bitcoin price moves in the opposite direction to US treasury yield.

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Bitcoin Price Rally to Continue After PCE

Popular analyst Michael van de Poppe recommends going for longs between $46K-$53K if a correction happens. Matrixport warns investors of a potential 15% market correction following Bitcoin’s recent surge past $60,000, despite no major resistance before ATH level of $68.7K.

BTC price skyrocketed over $63,000, less than 9% away from the $68.7K. The 24-hour low and high are $57,093 and $63,913, respectively. Furthermore, the trading volume has increased by 75% in the last 24 hours, indicating a rise in interest among traders.

Coinglass reports futures and options open interests (OI) rose to record levels, with total options OI rising over 8% to $33.86 billion. Spot Bitcoin ETF and FOMO are driving the rally, with Bitcoin ETFs recording the largest inflow of $673 million on Wednesday. Pre-Bitcoin halving continues to push Bitcoin price to $100K as predicted by multiple experts.

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