Critical Inflation Data Revealed in the US: How Did Bitcoin, Dollar, and Gold React?

• The US Consumer Price Index (CPI) increased by 0.2% in July, with annual inflation rising to 3.2%, triggering sharp movements in the markets, including the cryptocurrency space.
• The Federal Reserve’s historic tightening period and increases in interest rates have led to significant declines in Bitcoin’s price, and the new inflation data have also had noticeable effects on the dollar and gold.
• After the release of the critical inflation data, different reactions were observed in the prices of Bitcoin, the dollar, and gold; Bitcoin and gold prices saw slight increases, while the dollar index initially dropped but quickly recovered.

Critical inflation reports in the US have been announced; The lower-than-expected annual inflation caused sharp movements in the markets.

Critical Inflation Data in the US Announced

The Consumer Price Index (CPI) increased by 0.2% in July, in line with economists’ expectations of 0.2%, and remained unchanged from 0.2% in June. On an annual basis, inflation increased by 3.2%, which was below the expected level of 3.3% and higher than the 3.0% level in June.

#BREAKING

U.S. CPI: +3.2% YEAR-OVER-YEAR (EST. +3.3%)
U.S. CORE CPI: +4.7% YEAR-OVER-YEAR (EST. +4.8%)

— CO NEWS (@coinotagen) August 10, 2023

The core CPI, which excludes volatile food and energy costs, was 0.2% higher in July compared to the 0.2% and 0.2% estimates in June. The annual core CPI in July was 4.7% compared to the 4.8% and 4.8% estimates in June.

In early 2022, the US Federal Reserve began a series of interest rate hikes, which has now turned into a historic tightening period, to combat rapidly rising inflation, and has increased its target interest rate by over 500 basis points in the past 17 months. The latest interest rate hike took place at the Fed’s last policy meeting in June. The increase in interest rates caused Bitcoin to drop from over $69,000 at the end of 2021 to just over $16,000 by the end of 2022, and only slightly above $29,000 this year.

Headline inflation was above 9% at one point last year and has mostly declined since then, despite the 3.2% increase in July. The core rate peaked at 6.5% in 2022. Although it has decreased, it has not decreased as dramatically as the headline number. The Fed’s target rate for inflation is 2%, but central bank members have repeatedly stated that they do not need to see the 2% rate to end the tightening cycle.

So far, it has been observed that the markets largely expected the US central bank to keep their hands off at their meeting in September and continue in the same way for the rest of 2023.

How Did Bitcoin, Dollar, and Gold React?

After the release of critical inflation data, the price of Bitcoin increased by 0.26% to $29,635 – before the data was released, the price of Bitcoin was trading at $29,556. The lower-than-expected inflation rate did not provide an overly volatile movement for Bitcoin.

The US dollar index (DXY) experienced a 0.30% decrease and fell to 101.784 after the release of inflation data – before the data was released, DXY was at 102.116. However, after this decrease, DXY quickly recovered and rose to 102.236.

Gold, on the other hand, rose by 0.32% to $1,930 – before the data was released, the price of gold was $1,923. However, it later experienced a decline and is currently trading at $1,925.