U.S. inflation cooled in July as expected, while Bitcoin barely moved after investors largely priced in the softer data beforehand.
The Consumer Price Index rose 0.1 per cent from June, matching economists’ forecasts, according to the U.S. Bureau of Labor Statistics. Prices had fallen 0.4 per cent in June.
Furthermore, over the past 12 months, consumer prices increased 3.4 per cent before seasonal adjustments. Shelter costs drove roughly two-thirds of July’s overall monthly increase, rising 0.1 per cent. Meanwhile, energy prices fell 1.5 per cent as cheaper gasoline helped offset increases elsewhere.
Core inflation excludes volatile food and energy prices and gives investors another view of underlying price pressures. That measure rose 0.2 per cent in July after remaining flat in June. Additionally, core prices increased 2.5 per cent over the past year.
Investors closely watch inflation because it can influence the Federal Reserve’s decisions on interest rates and borrowing costs throughout the economy. Lower inflation can encourage the Fed to cut rates, which generally makes riskier investments more attractive.
Consequently, softer inflation reports can support assets such as Bitcoin by reducing the appeal of interest-bearing alternatives. However, Bitcoin gained only about USD$209 following the report, rising 0.33 per cent to approximately USD$63,750. Its daily trading range remained around 1.5 per cent.
Total cryptocurrency market capitalization slipped 0.9 per cent, from USD$2.19 trillion to USD$2.17 trillion. The outcome was largely priced in before Wednesday because traders had already expected inflation to cool at roughly this pace.
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Bitcoin ETFs attracted USD$854 million last week
Furthermore, annual inflation remained above the Federal Reserve’s 2 per cent target, limiting the report’s impact on rate expectations. Investors had moved toward expectations for easier monetary policy before Wednesday’s CPI release.
Spot Bitcoin exchange-traded funds attracted roughly USD$854 million across five consecutive sessions last week. Meanwhile, fading expectations for higher interest rates helped produce the funds’ strongest inflow streak since May.
Bitcoin was pinned inside a relatively narrow trading range following its sharp early-August selloff. The cryptocurrency has found support around USD$62,000, while sellers have resisted moves toward approximately USD$67,000. Additionally, Bitcoin has traded below USD$65,000 since the sharp decline earlier this month.
Its 50-day moving average sits below its 200-day average, which traders commonly view as a bearish technical signal. However, prediction-market traders remained cautious, assigning Bitcoin greater odds of falling toward USD$55,000 than reaching USD$84,000 this month.
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