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U.S. Inflation Eases to 3.4%, Bitcoin Reclaims $64k

May 15, 2024

The U.S. Bureau of Labor Statistics just released its inflation data for April. The Consumer Price Index dropped to 3.4%, in line with expectations. Nevertheless, this marks the 37th successive month where the inflation has flashed a reading above 3%.

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President Joe Biden acknowledged that the country has made progress on inflation. However, there is no room for complacency. Notably, petrol prices and higher rents majorly accounted for the rise in expenditure for consumers. Biden asserted that the burden on consumers' shoulders remains high and there’s still “a lot more to do.”

The inflation eased for the first time in April after six months. This opens the doors for the Federal Reserve to gradually bring down the interest rates. Since July last year, the hawkish Fed has kept the interest rate oscillating around 5.3%. The cost of borrowing is notably around its two-decade high, and officials believe that this will help in easing the pressures that are driving up prices.

Since the beginning of the year, rate cut decisions have been pushed back, but with inflation cooling now, traders have already doubled down on their Fed rate cut bets for September and December.

The dollar index [DXY] has been on a downtrend for almost a month. On the heels of the CPI data release, it fell by another 0.33% to 101.4.57, putting the greenback in a vulnerable position when compared to other currencies including the yen and the euro. Market participants’ drop in confidence was a boon for other asset classes like stocks and crypto.

The S&P and Nasdaq both opened in green and were up 0.6% on the daily at press time. Likewise, even crypto assets registered a momentary spike in prices. Bitcoin was trading around $62.6k before the data release. Post the announcement, it claimed a high around $64.6k. Most other assets tagged along. This was supported by a $70 billion injection in the overall market cap that noted a rise from $2.21 trillion to $2.28 trillion.

DXY Fluctuations | Source: Investing.com

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