Bitcoin Price Surprisingly Strong As Hot US Inflation Data Throws Fed Rate Cut Story Into Doubt – Where Next for BTC?
Despite hotter-than-expected inflation data, the Bitcoin price defied expectations and surged in value on Wednesday, even as the US Federal Reserve’s rate cut story was thrown into doubt.
The US Consumer Price Index (CPI) reported a 0.4% increase in March, exceeding the anticipated 0.3% rise. Core CPI metrics also surpassed forecasts.
This news sent US bond yields and the US dollar soaring, as traders reconsidered their bets on the US Federal Reserve’s rate cut.
The US 10-year yield reached its highest level since November, climbing nearly 20bps. Meanwhile, The US Dollar Index (DXY) surged 1% to over 105, also hitting its peak since November 2023.
These big moves weighed heavily on US stock prices, with the S&P 500 last down around 1% on the day. The benchmark US equity index hit its lowest level in nearly four weeks earlier in the session.
Lower stock prices coupled with strength in yields and the US dollar typically spell weakness for crypto prices. That’s because crypto prices tend to have a strong positive correlation to stocks, and a negative correlation to yields and the USD.
However, the Bitcoin price’s bounce back to the $69,000s may have caught some traders off guard, suggesting that the cryptocurrency market is not as closely aligned with traditional financial markets as once thought.
Expectations for easing from the US Federal Reserve has been a major driver of Bitcoin’s price appreciation this year.
As noted, that narrative took a blow following the latest data. US interest rate futures markets currently are now only pricing a 15% chance that the Fed cuts interest rates by 25 bps to 5.0-5.25% in June, as per the CME’s Fed Watch Tool.
One month ago, US money markets were pricing a 57% chance of a rate cut in June.
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