The Producer Price Index (PPI) inflation in the United States has risen to 2.6%, according to the latest release by The U.S. Bureau of Labor Statistics on Friday. This unexpected increase has caused traders to become cautious about potential Federal Reserve rate cuts, as the inflation data came in hotter than expected. The impact of this inflation rise was immediately felt in the cryptocurrency market, with Bitcoin traders responding by initiating a selloff, causing the price of BTC to drop.
The U.S. Bureau of Labor Statistics release revealed that the annual Producer Price Index data came in at 2.6%, surpassing market expectations of 2.3% and up from 2.2% the previous month. Additionally, the Core PPI Year-over-Year (YoY) also saw a significant increase, rising 0.5% to 3.0%, compared to 2.3% in the previous month. In terms of month-over-month changes, the Producer Price Index increased from -0.2% to 0.2%, marking a 0.4% rise in just one month. Similarly, the Core PPI also saw an increase from 0.3% to 0.4% in the same timeframe.
Following the release of the inflation data, futures tied to major indices such as the S&P 500, Dow Jones Industrial Average, and Nasdaq 100 remained flat. The Producer Price Index inflation has now increased for five consecutive months, despite a decline in the U.S. Consumer Price Index (CPI). While the Federal Reserve does not consider PPI as a key metric for measuring inflation, the rise has raised concerns about the timeline for Fed rate cuts.
The U.S. Dollar Index (DXY) exhibited volatility after the inflation data was released, currently standing at 104.34. The DXY has declined following the CPI data, while the U.S. treasury yield has increased by 0.021% to 4.205%, although it has fallen from 4.47% earlier in the month.
Despite the unexpected rise in PPI inflation, the odds of a 25 basis points rate cut by the Federal Reserve in September remain above 93%, according to data from CME FedWatch. The price of Bitcoin currently trades at $57,486, down 2% in the last 24 hours, with a trading volume decrease of 3%, indicating a slight decline in trader interest.
In the derivatives markets, traders have taken a mixed approach amid the uncertainty. Options traders are targeting a rebound in BTC price to at least $58,000, near the maximum pain point of $58,500. On the other hand, BTC futures open interest has declined by 2% in the last 24 hours, with a potential rebound expected to reach $30 billion.
Overall, the unexpected rise in U.S. PPI inflation has caused Bitcoin traders to become more cautious, as they navigate the implications of this data on the cryptocurrency market. The situation remains fluid, with market participants closely monitoring developments to assess the potential impact on future trading strategies.