U.S. Inflation Falls 0.1% in June; Bitcoin Surges to $59,100

Bitcoin surges to $59,100 as U.S. inflation drops to -0.1% in June, fueling Fed rate cut speculation.

By Athena Xu

7/11, 09:21 EDT
Bitcoin / U.S. dollar
Bitcoin / US Dollar

Key Takeaway

  • June CPI fell by 0.1%, beating expectations, with Core CPI also lower than forecasted, boosting market sentiment.
  • Bitcoin surged nearly 2% to $59,100 post-report; U.S. stock futures rose and the 10-year Treasury yield dropped to 4.20%.
  • Odds for a Fed rate cut in September increased to 87%, driven by weakening labor market and inflation data below targets.

Inflation Data Boosts Bitcoin

The latest Consumer Price Index (CPI) report released on Thursday morning revealed that inflation continued to retreat in June. The CPI showed a negative 0.1% pace against forecasts for a 0.1% gain and May's 0.0% read. On a year-over-year basis, the CPI was up 3.0%, lower than the expected 3.1% and May's 3.3%. Core CPI, which excludes food and energy costs, rose 0.1% in June, better than the anticipated 0.2% and May's 0.2%. Year-over-year, Core CPI increased by 3.3%, slightly below the forecasted 3.4% and June's 3.4%.

Following the report, Bitcoin (BTC) surged to $59,100, marking a nearly 2% increase over the past 24 hours. This positive movement in Bitcoin's price comes as traditional markets also reacted favorably, with U.S. stock index futures rising and the 10-year Treasury yield dropping nine basis points to 4.20%. Gold prices also saw a 1% increase, reaching $2,404 per ounce.

Fed Rate Cut Speculation

Ahead of the CPI report, market participants were increasingly optimistic that the U.S. Federal Reserve would trim its benchmark fed funds rate at its mid-September meeting. The CME FedWatch tool indicated a more than 70% chance of this happening, up from less than 50% a month ago. Fed Chair Jerome Powell, in his recent Congressional testimony, neither confirmed nor denied this possibility but acknowledged a weakening labor market and the Fed's focus on downside risks to the economy. Powell reiterated the need for continued confirmation that inflation is returning to the 2% target before considering rate cuts.

The latest inflation figures have further fueled speculation about rate cuts. The odds for a September rate cut rose to 87%, and the chances for two or more rate cuts by the Fed's November meeting jumped to nearly 50%. The U.S. dollar index also slumped nearly 1%, a significant move for the gauge.

Bitcoin's Recent Struggles

Bitcoin has faced considerable pressure in recent weeks, having reached an all-time high above $73,500 late in the first quarter. The second quarter saw a slowdown in inflows and occasional sizable net outflows into U.S.-based spot ETFs. Additionally, a flood of supply from the sale of government holdings and the return of Mt. Gox tokens in late June and early July sent Bitcoin's price crashing to below $54,000, nearly 27% below its record high.

This decline in Bitcoin's price has been particularly frustrating for bulls, given that other risk assets, such as U.S. stocks, have continued to surge higher throughout the summer. The S&P 500 and Nasdaq recently completed their seventh consecutive day of advance, achieving new record highs for both indices.

Street Views

  • Jerome Powell, Fed Chair (Cautiously Optimistic on U.S. economy):

    "The central bank wants continued confirmation that inflation is returning to its 2% target before rate cuts can be truly considered."