July CPI Gives Markets Temporary Relief

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The release of the Consumer Price Index for July shows that inflation eased up by 0.5% from 9.1% in June, offering some relief to traditional and crypto markets.  Immediately following the release of the July’s CPI, Bitcoin gained over 3% and Ethereum broke past $1800 with a 7.5% gain.  The stock markets show a similar rally with the S&P 500 and Nasdaq both closing out the day with gains of 2.1% and 2.9% respectively.     

Although inflation is slowing slightly, there is only a cautious level of optimism in the air as the overall 8.5% inflation minus the cost of food and energy is posting the same 5.9% from June.  The new CPI decrease was reflected largely by the changes in gas prices last month. Tomorrow’s release of the Producer Price Index will offer a better glimpse into what can be expected for the coming months and how the Federal Reserve may react as a result.  Should the FOMC lower the next interest rate hike to 50 basis points, next quarter may prove better than previously expected.  There are still many more obstacles to pass and indicators to check before we begin to see a doveish Fed, but so far the outlook isn’t nearly as dire as expected.

With regard to crypto, both Bitcoin and Ethereum have held positions and it's possible to have seen a bottom in the fallout of the crypto winter.  If the traditional markets continue to perform, inflation tempers, and the Fed takes a less hawkish approach, a steady and slow recovery for crypto is seemingly on the horizon.  Even now, as the climate remains uncertain, big business deals like that of the Coinbase and Blackrock partnership offer renewed confidence and exhibit a strengthening marketplace.