The US PPI hits a new high impacting interest rate cut expectations, the crypto market falls first and then rebounds!

On the evening of August 14, the United States announced the July PPI data, which soared to 0.9% month-on-month, reaching a three-year high, and rose to 3.3% year-on-year. The crypto market immediately fell sharply. Bitcoin dropped from a high of about 124500 on that day to about $117156 in the early hours of the 15th, while Ethereum fell from 4790 to 4451.

Previously, the CPI announced on Tuesday was slightly lower than expected, raising market expectations for a 50bp rate cut by the Federal Reserve in September. However, after the PPI data was released, the 50bp rate cut was basically ruled out, and the probability of a 25bp rate cut dropped from nearly 100% to about 92.1%. On August 15, the crypto market rebounded after a brief decline, but macro uncertainty remains.

PPI soars, September interest rate cut probability decreases

PPI measures the changes in selling prices by producers, serving as an upstream indicator that reflects inflation pressure ahead of CPI. An increase will lead to higher production costs, which will be transmitted to the consumer end. This time, the PPI increase exceeded expectations, with a month-on-month rise of 1.1% in service PPI, the largest since March 2022. The main reason is a 2% surge in profit margins for wholesale machinery and equipment. Analysts state that companies are passing on tariff costs to the manufacturing and consumer ends, and inflation may moderately rebound in the second half of the year. Previously, the market widely anticipated a rate cut of 25 - 50 basis points in September, but the probability of a 25 basis point cut has dropped to about 92%, while the possibility of a 50 basis point cut is nearly zero.

The crypto market is experiencing a short-term recovery, but uncertainty remains.

After the market decline on the evening of the 14th, Bitcoin and Ethereum slightly rebounded on the 15th, which may be a bottom-fishing opportunity for those optimistic about the future market. However, the "cold" PPI indicates that inflation is uncontrolled, and there are uncertainties regarding interest rate cuts. The short-term market recovery is due to a technical rebound from overselling and investors buying on dips, but the macro environment remains uncertain. The Federal Reserve's policy in September will depend on future data regarding inflation, employment, and other factors. If inflation data comes in strong, the extent and pace of interest rate cuts may not meet expectations, delaying improvements in market liquidity.

For the crypto market, macro factors amplify price fluctuations. When favorable, core assets are expected to break resistance levels, while when unfavorable, they may pull back. Before the Federal Reserve's interest rate meeting in September, key data includes inflation (such as CPI, PPI, core PCE), employment (non-farm payroll report, unemployment claims), and macro activity and consumption (retail sales, ISM manufacturing and services PMI). These data will be released successively from the end of August to mid-September, and on September 16 - 17, the Federal Reserve will hold a meeting and announce its interest rate decision. Crypto and US stocks are sensitive to macro data, and investors should seize the rhythm to avoid unilateral bets #BTC# #ETH# .