Daily News | Bitcoin Rockets to Nearly $30K, Dollar Rises Amid Fed Rate-Hike Bets

Crypto Daily Digest: Bitcoin Surges to Nearly $30K, Dollar Rises as Investors Bet on Federal Reserve’s Rate-Hike Path

Good morning, traders! Let’s seize this Tuesday relentlessly and make the most of it! 🚀

Despite concerns about another interest-rate hike by the Federal Reserve, the S&P 500 benchmark slightly rose by 0.1% in a quiet holiday trading session, leading to a decline in tech stocks. Trading volumes in the US equities market were low due to the European holiday.

In Asia, equity markets are expected to start weak following the quiet trading session in the US. The dollar has increased as investors have raised their bets on the Federal Reserve’s rate-hike path. In Australia, bonds have fallen, with traders increasing their wagers on a rate hike in the US before the report on consumer prices, which is expected to show a 0.4% monthly increase in core CPI. Bank of Japan Governor Kazuo Ueda commented that the Bank of Japan’s yield curve control and negative interest rates are appropriate given the current economic conditions. The International Monetary Fund predicts that interest rates in the US and other industrial countries will go back to ultra-low levels.

Bitcoin saw a surge to nearly $30K in investor Optimism on Monday, reaching its highest level since early June. Other major cryptocurrencies also experienced gains, with some analysts cautiously optimistic about the sustainability of Bitcoin‘s surge.

Wednesday’s release of the consumer price index (CPI) report for March will be closely watched for signs of inflation that could impact the central bank interest rates and the crypto market. The US Federal Reserve’s May meeting is also important, as many market watchers predict it might end its more than year-long series of interest rate hikes.

Topic of the Day: Sticky Inflation: Why The Fed Is Worried About The Current Trends

Recent data suggests that US inflation is too high and too sticky given the Fed’s mandate, and in the short-term, it looks like things are going in the wrong direction. The Consumer Price Index (CPI), which measures the average change in prices over time for a basket of goods and services consumed by households, has been rising steadily in recent months, reaching its highest level in nearly 40 years in November 2021.

One key indicator of inflation is services stability at elevated levels. In order to reverse this dynamic, nominal wage growth will need to decline from current levels. Its been elevated at the same level for 9 months now. The declines in oil prices had been an important disinflationary impulse in the second half of 2022, which gave the illusion that the inflation problem was over. But in recent months, that decline has stopped and reversed. Traded oil prices are back at 6-month highs.

An important source of durable goods inflation over the second half of 2022 came from used car prices rolling over. That also has stopped and reversed. Wholesale prices through 10 days ago have started to rise again, and that will translate soon. A lot of the disinflationary pressures from the SPR drawdown and the improvement in supply chains are behind us, and we are now seeing in the timeliest numbers that disinflation recede. At the same time, the underlying services pressure remains constant.

If anything, there are inflationary pressures in the pipeline that suggest that inflation will be rising in coming months, not falling on a short-term basis. Inflation is slow-moving, and as we have seen in Europe, even weak but not terrible growth can keep inflation going. It’s hard to see the Fed soon making the case that they’ll be clearly on a path to their 2% target, given the inflation backdrop.

Inflation can have a significant impact on the economy, as it reduces the purchasing power of consumers and erodes the value of savings. Moreover, inflation can make it difficult for businesses to plan for the future and make long-term investments, as they cannot accurately predict the cost of inputs and the prices they will be able to charge for their products. While the Fed has taken steps to keep inflation under control, recent trends suggest that more needs to be done to reverse the upward trajectory. Inflation is a complex issue that requires careful management by policymakers.