According to official data, the consumer price index decreased by 0.4 percent in June. This decline was the largest monthly decline since April 2020. The index increased by 3.5 percent on an annual basis. Core inflation, which excludes food and energy, remained unchanged during the month, rising by 2.6 percent annually. Both data were below market expectations. Energy prices largely did the work. The energy index fell by 5.7 percent in June, again experiencing its steepest monthly decline since April 2020, and gasoline prices fell by 9.7 percent, more than offsetting the increases in housing and food.
The leading cryptocurrency exceeded 63 thousand dollars minutes after the data was announced. Bitcoin maintained the $62,000 threshold throughout the US's air strikes on Iran and the closure of the Strait of Hormuz. The eight-week ETF outflow streak was also broken.
21Shares senior research strategist Matt Mena described the data as the push needed to break $65,000 and move towards $66,000. Mena stated that Bitcoin has returned an average of 2.8 percent over the last three years, following cooler-than-expected inflation data. According to the analyst, exceeding 66 thousand dollars may bring the attempt of 70 thousand and possible 75 thousand dollars to the agenda. Mena argued that as long as tensions with Iran do not worsen, a move towards 100 thousand dollars by the end of the quarter and a retest of the historical peak of 126 thousand dollars at the end of the year or the beginning of 2027 is possible.
Fabian Dori, investment director at Swiss bank Sygnum, offered a more measured view. Dori viewed the cooling core data as the first real sign that spring energy-driven inflation is weakening rather than spreading, and emphasized that the Fed is monitoring core inflation rather than headline inflation. Dori also warned that we should not make more sense than a single month. According to the analyst, the Fed, under Chairman Kevin Warsh, is proceeding based on data and easing the mood without a single cold month changing the destination. A real decline in inflation would reduce rate hike expectations, loosen the dollar and real yields, and increase the likelihood that ETF flows will turn from outflows to modest inflows over the summer, Dori said.
The relief comes after a week in which almost all desks expected inflation to remain sticky. For a week, analysts' common expectation was a Fed with no room to ease and a market forced to price in a rate hike. The renewed conflict in the Middle East and the rise of Brent oil above 85 dollars fed this cautious atmosphere. The crypto market had begun to give a roughly 61 percent chance of a rate hike of at least half a percentage point before the end of the year.
Warsh delivered the Fed's six-month monetary policy statement to the House Financial Services Committee on Tuesday. Warsh told lawmakers the committee cannot tolerate permanently high inflation and is committed to restoring price stability. However, the text he prepared did not contain any signals regarding the interest rate decision on July 28-29. The next test, analysts say, will be whether ETF demand can produce consecutive positive sessions for the first time since May.