Key Points:
- Forward-looking metrics suggest a potential rebound in inflation in the coming months.
- Economists estimate a 0.2% month-on-month increase in the July consumer price index (CPI), signaling a continued easing of inflation.
- Traders may increase exposure to risk assets, including bitcoin, if the CPI data matches estimates.
- Forward-looking metrics indicate the possibility of stagflation, which would negatively impact risk assets.
- Analysts warn of elevated bond yields and expect headline U.S. inflation to be closer to 3.5% and core U.S. inflation to be closer to 5%.
Hot Take:
The upcoming release of the U.S. CPI data for July has crypto and traditional market traders on edge. While economists expect a slight increase in the CPI, forward-looking metrics indicate the potential for a rebound in inflation in the months ahead. This could trigger a sharp repricing of interest rate expectations, leading to downside volatility in risk assets, including bitcoin. Traders may be encouraged to increase exposure to risk assets if the data matches estimates, but they may be overlooking the possibility of stagflation. Stagflation, coupled with high bond yields and elevated inflation, could have a detrimental impact on risk assets. Analysts warn that headline U.S. inflation may be closer to 3.5% and core U.S. inflation closer to 5%. It remains to be seen how these factors will ultimately affect the cryptocurrency market.
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