"Two Days, Trillions: How Inflation Data Could Reshape Markets and the Fed’s Path"

This week’s U.S. inflation data is shaping up to be a defining moment for global markets, with the Producer Price Index (PPI) due on September 11 and the Consumer Price Index (CPI) set for release on September 12. These reports are expected to play a critical role in determining the Federal Reserve’s interest rate decision on September 17, according to the latest Bybit x FXStreet TradFi Report. The data will influence not only monetary policy but also the trajectory of risk assets, including cryptocurrencies, equities, and commodities.

The Fed is currently priced to cut rates from 4.5% to 4.25% in September, based on CME FedWatch data. However, softer-than-expected inflation readings could bolster expectations for further easing later in the year. If the PPI and CPI come in below forecasts, the Fed may feel more comfortable about cutting rates, potentially boosting liquidity across asset classes. Conversely, stronger-than-expected inflation could force policymakers to adopt a more cautious stance, tempering the momentum seen in traditional and digital markets alike.

Bitcoin, currently hovering below its August high of $124,500, stands at a potential inflection point. A subdued CPI could push BTC toward $120,000 and even $135,000 by year-end, while a hotter-than-expected report could drive a correction below $107,200. This dynamic is mirrored in the broader equity markets, where the S&P 500 is holding above 6,500. Should inflation data confirm a cooling trend and reinforce rate-cut expectations, the index could target 7,000, according to market analysts.

Cross-asset volatility is anticipated as a direct consequence of the inflation data, with key risk assets poised for significant movement. Cryptocurrencies, gold, and growth equities are expected to react sharply depending on the direction of the data. This volatility will create two critical trading windows for investors and traders, with the outcomes of the PPI and CPI reports serving as key market-moving catalysts.

The crypto market has shown recent divergence in institutional flows, with Bitcoin ETFs experiencing $246.42 million in net inflows, while Ethereum ETFs recorded $787.74 million in outflows. These flows reflect a broader shift in investor sentiment toward Bitcoin amid the current macroeconomic environment. The coming week’s data, especially the preliminary 12-month jobs revision from the Bureau of Labor Statistics on September 9 and the University of Michigan’s Consumer Sentiment Index on September 12, will offer further clarity on the Fed’s potential path and the broader economic outlook.