Bitcoin (BTC) sees its first weekly close above $80,000 since early May as clouds gather over the US inflation outlook.
Key points:
- US PPI and CPI inflation numbers are due this week prior to the Fed’s Sept. 16 decision on interest-rate changes.
- Amid record currency interventions, analysis warns that Japan may not be able to sell US treasuries to help stabilize the yen in going forward.
- Bitcoin’s supertrend indicator delivers its first “buy” signal since late 2025, copying the previous bear-market recovery.
CPI, PPI due as markets see 0.25% rate hike next
US inflation data returns to the forefront this week after surprise employment data pressured crypto and risk assets. The August prints of the Producer Price Index (PPI) and Consumer Price Index (CPI) are due for release on Thursday and Friday, respectively.
CPI matched market expectations at 0.1% month-on-month and 3.4% year-on-year last month, continuing on from softer-than-anticipated June results. Although the numbers paint a positive picture for inflation, Kevin Warsh, chair of the US Federal Reserve, stated that these data prints alone did not support the case for reassessing financial policy.
“Each of these broad inflation measures have fallen significantly from their highs of a few years ago, but progress through the past couple of years has been more modest, and while this summer’s PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved,” he said at the Jackson Hole economic symposium in late August, referring to the Fed’s “preferred” inflation gauge, the Personal Consumption Expenditures (PCE) index.
In response to the speech, markets priced in an increased likelihood of Federal Reserve rate hikes at its next meeting on Sept. 16. The latest data from the CME Group’s FedWatch Tool shows that consensus favors a 0.25% rate hike, with odds at 58.4%.
Fed target rate probability comparison for September FOMC meeting (screenshot). Source: CME Group
Fears of rate hikes were also spurred by last week’s nonfarm payrolls data, which came in far stronger than expected and included upward revisions of prior figures. The US economy added 162,000 jobs in August against a prior estimate of 56,000.
A stronger labor market reduces the need for the Fed to loosen policy, cementing the potential for rate hikes with core inflation still above its 2% target. Markets have maintained a hawkish outlook on rates. This is despite Fed governor Christopher Waller voicing support for an ongoing rate-hike pause and US president Donald Trump renewing pressure on the Fed to enact rate cuts last week.
“The Fed Board, with its great new leader, must get smart – BE PATRIOTS for a change. High interest rates put the U.S.A. at a very unfair disadvantage, and I won’t allow that to happen!” he wrote in a post on Truth Social.
Both PPI and CPI have the potential to alter the outlook prior to the meeting, with crypto market volatility often accompanying inflation-data prints.
Commenting, trading resource Mosaic Asset Company noted that the strong jobs numbers could still offer stocks a silver lining.
“While the knee-jerk reaction is centered around the rate outlook, it’s worth keeping in mind that good news for the economy should be good news for corporate earnings. The jobs report adds to recent data pointing to an economy expanding at solid pace, which should support the bull market looking ahead,” it wrote in analysis at the weekend.
Mosaic cautioned that seasonality could add an additional hurdle, with September traditionally equities’ worst-performing month, while November’s US midterm elections should make for more volatile conditions into Q4.
Japanese yen interventions hit record
Traders are focused on the Japanese yen as new government data reveals the extent of its record currency interventions.
On Monday, Japan’s Ministry of Finance reported that its foreign reserves had decreased by $79.57 billion from the end of July amid a record currency intervention in the yen. Japan’s currency strengthened to 155 against the US dollar as a result, still holding that area during Monday’s Asia trading session.
“Japan may have used both foreign securities and deposits, but it most likely sold U.S. Treasurys,” Atsushi Takeda, chief economist at Itochu Research Institute, told Bloomberg.
USD/JPY one-day chart. Source: Cointelegraph/TradingView
The move had potential implications beyond the yen, with US bond yields already facing pressure at the long end, prompting the Treasury to announce contingency measures set to begin on Sept. 9. Japan selling US Treasuries to fund future interventions may draw a negative response from Washington, leaving the Bank of Japan (BOJ) in a bind should yen weakness return.
“That would make it difficult for the ministry and the Bank of Japan to act going forward,” Akari Nishimura, economist at the Japan Research Institute, added.
Polymarket probabilities…
cointelegraph.com