Inflation Surge Shakes Markets; Bitcoin Rebounds

The latest US Consumer Price Index (CPI) data for January has exceeded market expectations, sparking high volatility in both stock and cryptocurrency markets. The CPI rose by 0.5% month-on-month, the largest increase since August 2023, while the core CPI increased by 0.4% month-on-month. This inflation data has led to a mixed performance in the US stock market, with the S&P 500 down 0.27%, the Dow down 0.50%, and the Nasdaq up 0.03% at the close.

In the cryptocurrency market, Bitcoin temporarily fell to $94,000 after the CPI announcement but quickly rebounded, surpassing $98,000 in the early morning. Ethereum also saw a significant rebound, breaking through $2,700 with an increase of over 5%. The US dollar index was boosted to a daily high by the CPI report but later retreated to roughly unchanged. Oil prices ended a three-day rally, with an intraday low of nearly 3% decline, while spot gold entered a correction phase but was boosted by safe-haven demand for a V-shaped reversal, closing up by 0.2%.

The strong inflation data and a robust labor market support the Federal Reserve in taking a more cautious approach to rate cuts. The market now expects only one 25-basis-point rate cut this year, compared to the previous expectation of at least two, and further delaying the timing of the rate cut from September to December. This shift in expectations has led to increased market volatility, with investors seeking hedging options. Financial trading platforms, such as eeee.com, have launched stablecoin financial products with attractive annualized yields to provide investors with potential hedging opportunities.

In the wake of the CPI data, the US stock market initially fell but later narrowed its losses as news of a possible ceasefire in the Russia-Ukraine conflict emerged. Large-cap tech stocks performed differently, with Tesla leading the gains at 2.44%, ending a five-day losing streak. The cryptocurrency market also experienced upward volatility, with Bitcoin and Ethereum rebounding amid bad news, possibly indicating that the market has bottomed out in the short term, with strong support below.