Bitcoin (BTC) fell at the Wall Street open on Dec. 9, while US economic data appeared to disappoint markets.
The focus is on the “big trigger” of Bitcoin vs. CPI
Data from Cointelegraph Markets Pro and TradingView showed that the BTC/USD pair approached $17,000 after breaching this level overnight.
The pair reacted badly to the US Producer Price Index (PPI) data, which despite being above expectations still beat the previous month’s reading.
“A bit of an overreaction towards PPI, which has fallen significantly since last month, but less than expected,” answered Michaël van de Poppe, founder and CEO of the trading firm Eight.
Van de Poppe, like others, pointed out that the crux of the macroeconomic keys would come next week with the publication of the Consumer Price Index (CPI) for November.
“Next week’s CPI is the big trigger, as it was earlier this month,” he added.
The CPI could be a pivotal point, trading firm QCP Capital continued, as if it continued its downward trend, markets could have even stronger conviction about lower inflation greeting the new year.
The Fed’s Federal Open Market Committee (FOMC) meeting, to be held days later and at which policymakers will decide on raising interest rates, should add fuel to the fire.
Tuesday’s CPI will once again be “the biggest CPI release ever”, this time because the market has primed it for it with its epic 2-month rally to the downside.”QCP wrote in a market update that day.
“At the FOMC, Fed members will publish their updated inflation and interest rate projections. Markets will focus on where they forecast inflation next year, as well as where they see rates in 2023 and 2024. Both events are the last remaining hurdles to a year-end rally.”
Analysts acknowledged that if the CPI were to disappoint, it would potentially “invalidate” the rally in stocks thus far. A 50 basis point rate hike had a 77% chance of happening, according to CME Group’s FedWatch tool.
US dollar takes a break
US equities were flat after the first hour of trading, with PPI failing to dent the results.
For macroeconomist and stock market analyst James Choi, this was to be expected, given that the Fed was already considering slowing its rate hikes.
“The Fed has already reversed course. Today’s PPI will not make a dent in Powell’s plan. It will be 50 basis points next week and that’s it”, forecastalso stating that his calculations forecast a CPI reading “much, much lower” than many believed.
The US dollar index (DXY) tried to recover the ground lost the previous day thanks to the CPI.
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