Key Points:
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The Producer Price Index (PPI) for July surged by 0.9% month-over-month and 3.3% year-over-year, significantly exceeding predictions. Consequently, market expectations for Fed interest rate cuts have diminished.
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Major cryptocurrencies such as Bitcoin and Ether rapidly fell in price following the release of the data.
Details:
On Thursday morning, inflation worries resurfaced in the U.S., prompting a broad decline in risk assets, including cryptocurrencies. The July PPI notably outpaced estimates, creating uncertainty about future interest rates.
The report showed a 0.9% increase in July, against forecasts of only a 0.2% rise, with the year-over-year measurement rising to 3.3%, beyond the estimated 2.5%.
Bitcoin, already sliding from a record high above $124,000, fell below $119,000 immediately after the news. Ether (ETH) similarly dropped nearly 4% to $4,550, mirrored by declines in other trending altcoins such as Solana and XRP.
Further labor market statistics showed initial jobless claims at 224,000, slightly below expectations, while continuing claims held steady at 1.95 million. This tight labor condition, combined with the robust PPI readings, suggests that the Federal Reserve may maintain higher interest rates longer to combat inflation.
According to CME FedWatch, the previous certainty of a September rate cut dropped from 100% to 96% after the new data came out.
In traditional markets, U.S. stock index futures dipped by 0.5%, while the dollar strengthened and the U.S. Treasury yield increased by five basis points to 4.25%.
The factors surrounding crown commodities, including cryptocurrencies, continue to experience turbulence as inflation stirs market dynamics.
