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Highlights
- JPMorgan, Citi, Goldman Sachs, Morgan Stanley, other banks estimates CPI inflation rising in coming months.
- Annual CPI comes in hotter at 3.5%, against 3.2% in previous release.
- Fed rate cuts likely in September.
- Bitcoin price may collapse to $60,000.
The Consumer Price Index (CPI) for March by the U.S. Bureau of Labor Statistics comes in at 3.5%, which is the most influential data for the U.S. Federal Reserve to likely settle the debate around the timing of Fed rate cuts. However, Wallet Street banks estimate a rise in inflation before it starts to cool again. The latest data amid resilience of the United States economy means the Fed could still hold rate cuts for longer.
Bitcoin rally witnessing headwinds such as the high US dollar, 10-year Treasury yields, and regulatory tightening, with halving jitter and inflation concerns at the top. Experts believe higher inflation could turn the tables making Bitcoin rally to $100k difficult.
Wall Street Banks Anticipate Hotter Inflation for Months
JPMorgan, Citi, Goldman Sachs, Morgan Stanley, Barclays, HSBC, UBS, BMO, and Citadel estimate the inflation to remain elevated for the coming months. Most banks anticipated CPI inflation to come in hotter at 3.4%.
While Bank of America estimates headline CPI inflation at 3.3%, Wells Fargo and Scotiabank anticipate even higher CPI inflation at 3.5%. The annual CPI inflation for February came in hotter at 3.2%. Also, the PPI and PCE inflation data were high in recent release.
Prediction market Kalshi’s forecasts are for 3.4%, while traders believe inflation will end up higher. US inflation has a 43% chance of falling to 2-2.9% this year, as per Kalshi.
Rate Cuts Starting in September
CoinGape reported that Fed swaps indicate rate cuts in June and July are off the table and the U.S. Federal Reserve can start rate cuts in September. However, Fed swaps now indicate rate cuts are now expected in November.
FED SWAPS SHIFT FULL PRICING OF RATE CUT TO NOVEMBER FROM SEPT
— *Walter Bloomberg (@DeItaone) April 10, 2024
On the other hand, the CME FedWatch Tool indicates a 51% probability of 25 bps rate cuts in June and 49% in July by the Federal Reserve. September data indicates a 40% chance of further 25 bps cuts in interest rates.
JPMorgan chief executive officer (CEO) Jamie Dimon in a dire warning earlier this week, said interest rate as high as 8% is still on the table amid persistent inflationary pressures driven by fiscal deficits and military conflict among other factors
The US dollar index (DXY) has dropped near 104 today from a high of 105 in early April. Federal Reserve officials, including Neel Kashkari and Jerome Powell emphasized the need for more inflation data before considering any rate cuts, with the Fed officials slowly turning cautious.
Moreover, the US 10-year Treasury yield also rises back to $4.5 from 4.35% after CPI, highest level since November. Bitcoin moves in the opposite direction to DXY and the 10-year treasury yield. Fed can remain patient as CPI inflation comes in higher above 3.2%.
Bitcoin to Fall Below $60,000 After CPI?
While analysts remain bearish on Bitcoin due to halving related volatility, Markus Thielen predicted BTC price to fall back to $62,000 and ETH price to $3,100 amid a lack of trading volumes. Traders must keep an eye on major levels for Bitcoin at $68,330 and Ethereum at $3,460.
Experts including Benjamin Cowen and Peter Brandt have also predicted a Bitcoin price correction to below $60,000 if BTC repeats a historical pattern seen during spot Bitcoin ETF and past halving events.
Moreover, BitMEX co-founder Arthur Hayes expressed concerns over constrained US dollar liquidity, contributing to heightened selling pressure on crypto assets.
BTC price fell 3% to $68,200 in the past 24 hours, with BTC open interest falling more than 3% in the past 24 hours. CME BTC Futures Open Interest is down 4% over the last 24 hours.
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