US CPI Preview: Bitcoin price holds ground at $30,500 while Dollar continues to decline

• US CPI or inflation is expected to decelerate to 3% year on year, with core CPI forecasted to come down by 0.3%.
• The US Dollar Index has been printing declines for the past week falling from 103.3 to 101.6
• Bitcoin price, on the other hand, is trading at $30,640 at the moment, and inflation coming at 3% could push the price up to $31,000.

US CPI (Consumer Price Index), also known as inflation, is estimated to inch closer to the Federal Reserve’s target of 2%. While the deceleration would serve as good news for the market, experts do not consider it to be a signal for any change in the prospect of another interest rate hike.

Read more - FOMC minutes indicate that a “mild” recession is likely in 2023; Bitcoin price stays put at $30,500

US CPI to slow down

US CPI for the month of May came in at 4%, while core CPI slowed down to 5.3% and going forward, experts are estimating each of the two to note further decline. The expectation from headline CPI is a deceleration to 3.1%, with many banks, including the likes of HSBC and Citi, forecasting 3%. 

Core CPI, too, is expected to slow down from 5.3% in May to 5% or 5.1% in June. Starting June 2022, inflation has been consistently slowing down from 9.1% to the present 4% year on year, marking an 11-month straight slowdown.

The impact of a slowdown in inflation could result in a decline in the Dollar’s value as well. Economists at OCBC Bank noted,

“Any disappointment (i.e. actual CPI coming in higher than expectations) would lead to USD rebound. But if we do get a low-3% print for headline or even under 5% print for core, then USD can continue to slide further.

At the time of writing, the US Dollar Index (DXY) could be seen at 101.6 after falling by more than 1.6% over the past week from 103.3.

DXY 1-day chart

However, analysts across the TradFi market mostly agree that the deceleration in inflation is not expected to have any impact on the prospect of another rate hike in the upcoming FOMC meeting.

As noted in the minutes from the recent Federal Open Market Committee (FOMC) meeting, 

“All bar two of the 18 officials noted in the Summary of Economic Projections (SEP) that additional rate increases would be appropriate in 2023.

Furthermore, the probability of a recession continues to hang above the United States economy. However, in order for the Fed to reach its 2% inflation target, labor market conditions would need to soften, and wages would need to see some growth which is possible only when the forecast of a “mild” recession reduces to “no” recession.

Bitcoin price stands strong

Bitcoin price and the crypto market is expected to gain from a slowdown in the Consumer Price Index (CPI) on Wednesday. The cryptocurrency is trading at $30,641 at the time of writing after failing a breach of the $31,000 mark twice in the last month.

However, inflation coming in at 3% could give the cryptocurrency a boost in an upwards direction.

BTC/USD 1-day chart

If the breach is successful, it could serve as a bullish signal for the rest of the crypto market as well. The total crypto market capitalization currently sits at $1.15 trillion, with the key barrier at $1.16 trillion expected to be breached following the release of the CPI data.