Bitcoin Price Rallies as Traders Await CPI Report and Fed’s Response to Inflation
Bitcoin’s recent surge to $29,400 is attributed to the anticipation of the April 12 Consumer Price Index (CPI) report, which could provide more insight into the Federal Reserve’s stance on inflation. If the CPI report shows a drop in inflation, Bitcoin could experience further gains.
On April 10, Bitcoin’s price rose 3.37% to over $29,300, which was accompanied by a rare decoupling between Bitcoin and U.S. equities, indicating the coin’s diminishing risk-on characteristics.
The release of the March CPI data on April 12, expected to show a decrease in inflation from 6.0% to 5.1% year-over-year, could prompt the Federal Reserve to shift towards a more dovish direction. Conversely, persistent inflationary forces could lead traders to bet on more interest rate hikes in May.
Bitcoin’s rise above $29,000 suggests that traders are pricing in a drop in inflation, which could lead to a potential Fed pivot.
However, the U.S. Dollar Index (DXY) climbed 0.7% on April 10, indicating that macro investors see a rate hike ahead. According to the CME Fed Watch Tool, the market sees a 70% probability of the Fed lifting rates by 25 basis points at its meeting in May, possibly due to a tightening labor market that provides the Fed with more ammunition to continue raising lending rates in the future.
From a fundamental perspective, Bitcoin appears to be prepared to reach $30,000 ahead of the Fed’s Federal Open Market Committee (FOMC). However, the cryptocurrency’s ability to hold those gains depends on the CPI data’s outcome.