The most recent US Consumer Price Index (CPI) data indicates that annual inflation has decreased to 3%, which has encouraged the financial market. In anticipation of future interest rate reductions, gold prices spiked above $2,400 during this improvement.
Stock prices and cryptocurrency assets, such as Bitcoin, should rise as a result of the improving economic outlook.
Data on CPI Encourages Financial Markets
According to US CPI data, inflation decreased to 0.1% from the previous month, resulting in the lowest annual rate since the pandemic of 3%. Positive sentiment has been generated in both traditional and digital markets as a result of this decline, which is the first notable decline in three years.
As consumer prices decreased, the total index rate decreased from 3.3% in May. Gas prices decreased by 3.8% as a result, although the cost of housing and food climbed by 0.2%.
Market sentiment has changed as a result of the news. With a 1.8% increase in intraday trade, gold prices jumped past $2,400 and reached $2,414. Stocks saw varied responses as well; certain assets saw rises. The increased expectation of interest rate decreases by the Federal Reserve is the cause of this increase.
Chris Larkin, E-Trade MD of Trading and Investing at Morgan Stanley, observed that the market is getting closer to the anticipated interest rate cut as a result of the CPI data.
He said the Fed’s argument for holding rates may become less persuasive if subsequent data doesn’t get “hot.”
“A lot can happen between now and September 18 but the Fed’s justification for not cutting rates may no longer be valid unless most of the numbers turn back into “hot” territory,” he stated.
In the meanwhile, the CPI data is consistent with the 2% annual inflation target set by the Federal Reserve. In spite of decreasing inflation, the Fed has kept its benchmark interest rate unchanged. The assumption of a possible release of pressure on financial markets is supported by the available data.
The advantages of cryptocurrency markets
The cryptocurrency markets have gained as well on the positive CPI report. Positive macroeconomic news also frequently encourages greater investment in riskier assets like cryptocurrency.
It is probable that investors would increase their holdings of assets like Bitcoin when the Fed eases market pressure. In the meantime, over the previous week, Bitcoin has increased by 5.21%.
Australian Dollar Gains on Softer Fed Rate Hikes Suggestioned by Lower US CPI Data
The Australian dollar (AUD) is trending upward; on Thursday, it reached 0.6798 versus the US dollar before marginally declining to 0.6770. The trading pair AUD/USD is bullish, according to the daily chart.
The AUD is still strong even if there are no noteworthy Australian financial events this week. Following the release of US inflation data, traders are modifying their bets based on this.
Remember that because of the high level of domestic inflation, the Reserve Bank of Australia (RBA) is still delaying rate decreases. The recent advances of the AUD could be reinforced by this decision.
In general, there is a clear sign of growth in the cryptocurrency markets due to the possibility of interest rate reductions. Memes coins might experience a comeback along with the anticipated market boom.
