Bitcoin starts the week with new August highs as traders weigh the impact of crunch US inflation data.
Key points:
- US CPI and PPI data comes amid fluctuating bets on Federal Reserve interest-rate hikes in 2026.
- The Japanese yen remains at the forefront as it creeps back toward the key 160 level against the US dollar.
- Bitcoin (BTC) traders see the area around $65,800 as crucial for bulls after BTC/USD hits new month-to-date highs.
- Larger Bitcoin wallets contrast with retail holders after a conspicuous two-month accumulation spree.
- Baskets of onchain indicators still see the bear market continuing in the second half of the year.
CPI, PPI data comes at crucial time for Fed
Key US inflation data is due as markets shift their expectations of Federal Reserve interest-rate policy.
The July prints of the Consumer Price Index (CPI) and Producer Price Index (PPI) will be released on Wednesday and Thursday, respectively.
The timing of the release is important — recent US inflation cues have given mixed signals to Fed watchers, while resolution of the US-Iran war likewise remains far from certain. The latter has implications for CPI in particular, given oil’s price sensitivity to events around the Strait of Hormuz shipping route.
“Crude oil prices remain caught between opposing forces, as markets assess the possibility of a breakthrough over the Strait of Hormuz against Iran’s conditions for reopening the strategic waterway,” Sugandha Sachdeva, founder of New Delhi-based research company SS WealthStreet, told Reuters on Monday.
CFDs on US WTI crude oil one-hour chart. Source: Cointelegraph/TradingView
Last month’s CPI and PPI results both surprised to the downside, with the former seeing its largest monthly decline since April 2020. Nonfarm payrolls numbers last week continued the trend, showing weaker-than-expected labor-market conditions.
Both bolstered odds of a more dovish Fed going forward, with markets switching from a 0.25% rate hike probability to a continued pause as the most likely outcome at its Sept. 16 meeting. CME Group’s FedWatch Tool showed a 56% chance of a pause as of Monday.
“A week ago, market-implied odds strongly favored a rate hike at the Fed’s next meeting in September. Those odds now slightly favor the Fed keeping rates on hold, with just one hike before pausing well into next year,” trading resource Mosaic Asset Company wrote in the latest edition of its newsletter, The Market Mosaic.
Fed target rate probability comparison for September FOMC meeting (screenshot). Source: CME Group
Mosaic added that last week’s ISM Manufacturing and Services data pointed to the US economy “holding up just fine,” despite the data sparking concerns over signs of future “stagflation” — rebounding inflation gauges combined with slow economic growth and rising unemployment.
Yen reverses days after US intervention
The US role in manipulating the Japanese yen remains a key point on the radar for traders worldwide after the first joint US-Japanese intervention since the late 1990s.
After JPY/USD weakened to its lowest levels since 1986 at the start of August, the New York Fed, acting on behalf of the US Treasury, purchased yen using euros via the Exchange Stabilization Fund, or ESF, a stockpile of foreign exchange reserves.
At the time, Treasury Secretary Scott Bessent hinted that the door was open to repeat interventions in future.
“We strongly support Japan’s decisive market and monetary steps to correct the substantial undervaluation of the yen,” he wrote in a post on X.
In the interim, however, the yen has begun to weaken again after initially strengthening to around 156 per dollar. At the time of writing, it was back above 158.50, closing in on the key 160 level once more.
Analyzing the history of yen interventions, Robin Brooks, a senior fellow in economic studies at the Brookings Institution, warned that the mechanism would be unable to change the status quo on its own.
“You’d think — given everything that’s getting thrown at markets — that the yen would have risen more than during the previous two intervention episodes we saw earlier this year, but that’s not true,” he wrote in a blog post on Friday. He said:
“Price action is comparable to the NY Fed’s rate check on Jan. 23, which came just ahead of Japan’s Feb. 8 general election. That’s underwhelming and supports my general take that this intervention – like past ones – will fail to stop the Yen’s weakening trend.”
USD/JPY one-day chart. Source: Cointelegraph/TradingView
Previously, Cointelegraph reported on the longer-term implications for the yen carry trade, a key liquidity consideration for crypto and risk-asset traders.
“For global markets, the question is less about any single intervention and more about whether higher Japanese yields alter the incentives for domestic investors to allocate capital overseas,” trading company QCP Capital commented last week.
Trader eyes BTC bullish divergences…
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