Bitcoin Up 1%, Braces For Volatility Ahead Of Inflation Data Release

Financial analysts are bracing for a potentially volatile week as markets grapple with inflationary concerns and the looming inauguration of Donald Trump..

A preview of the December Consumer Price Index (CPI) suggests persistently elevated inflation, despite a recent dip in the Producer Price Index (PPI), raising fears among investors and impacting bond yields and equity markets.

The specter of inflation continues to haunt U.S. markets as the anticipated December CPI data approaches.

While the U.S. job market remains robust, with non-farm payrolls surpassing expectations, analysts suggest that this could ironically contribute to market unease.

Predictions for the CPI show expectations of a year-over-year (YoY) increase of 2.8%, slightly up from November’s 2.7%, and a month-over-month (MoM) rise of 0.3%, matching the previous month’s rate.

Core CPI is predicted to remain steady at 3.3% YoY, with a slight decrease to 0.2% MoM.

These figures, even if in line with expectations, indicate that inflation is still not significantly slowing, with the Fed's 2% target still a distance away.

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QCP Capital noted that Trump’s imminent inauguration on Jan. 20 has already injected volatility into global markets.

His publicized plans for tariffs, particularly on imports from China, have further fueled inflationary concerns, though there is an expectation for a gradual implementation of these policies.

As a consequence, bond yields have seen a resurgence, with markets now pricing in only two rate cuts for 2025 and 2026.

This contrasts with the Federal Reserve’s prior projection of four cuts, and the 10-year and 30-year US Treasury yields are nearing the 5% mark.

These macro-economic pressures have prompted a decline in risk assets.

The S&P 500 flirted with breaking below $5,800 and Bitcoin briefly dropped below $90,000 on Monday, demonstrating market fragility.

Bitcoin is trading around $97,000 at the time of writing, up 1%.

However, QCP Capital points out that Trump's actual policies often deviate from his rhetoric, and inflation may not prove as severe as anticipated, and the new administration may also be crypto-friendly.

Benjamin Cowen, CEO of Into The Cryptoverse, also weighed in on how the upcoming CPI release could influence markets, stating that while strong employment numbers are currently perceived as bad news, due to questions they raise about the Fed's rate-cutting policy, good news on the inflation front could slow down the rise of longer-term Treasury yields.

“If inflation is not as bad as expected, then it would likely help slow the long end down from this rise,” he said.

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