U.S. CPI Report Approaches as Bitcoin and Ether Drop Amid Strengthening U.S. Dollar

SUMMARY

Bitcoin and Ether have bounced back from overnight lows but are still down over the last 24 hours.
A stronger dollar and potential inflation concerns could hinder hopes for future Fed rate cuts, according to analysts.

The crypto market remained stagnant amid the European morning as traders reconsidered the probability of noteworthy Federal Reserve rate cuts. Bitcoin (BTC) traded near $61,000, recuperating from its overnight low of $60,400, but it was still down 1.5% over the past 24 hours. Ether (ETH) followed suit, down 1.9% at $2,395. Other major cryptocurrencies like BNB and SOL dropped 1%, while XRP slid 0.6%, concurring to CoinDesk data.

The U.S. dollar index (DXY) rose to 102.97, its most noteworthy since mid-August, stamping a 2.7% gain since the September 30 low. This rise in the dollar’s strength comes ahead of a significant inflation report. The CME’s FedWatch tool indicated that traders presently see an 85% chance of the Fed cutting interest rates by 25 basis points at the November 7 meeting. A week prior, the probability was 65%, with a 35% chance of a 50 basis-point cut by year-end after the first cut in September.

Friday’s strong nonfarm jobs report fortified desires of U.S. economic strength, making traders rethink the speed and degree of future rate cuts. The minutes from the Fed’s September assembly showed contradiction among policymakers about how aggressively to cut rates. A considerable majority favored a half-point reduction, though a few communicated concerns about going that far.

Crypto sentiment has moved into the fear zone, with a score of 39, compared to 72 in equities. Alex Kuptsikevich, senior market analyst at FxPro, ascribed this to the more grounded dollar and the increasing allure of bonds, which may be reducing organization interest in bitcoin. Thursday’s U.S. inflation report could ignite market volatility if it deviates from expectations.

The report, due at 12:30 UTC, is anticipated to show a 0.1% month-on-month and 2.3% year-on-year rise in the consumer price index (CPI) for September. The core CPI, which excludes food and energy, is forecast at 0.2% month-on-month and 3.2% year-on-year, concurring to FXStreet. A hotter-than-expected inflation report may halt further Fed rate cuts, supporting the dollar’s rise and increasing risk aversion.

However, ING noted that the CPI is unlikely to cause major shifts in market estimation, as the Fed has moved its focus toward the labor market. Still, the inflation information might affect near-term market moves, especially if it surprises to the upside.