There is a lot of information about CPI, but many friends don’t know what it means. Let me share the impact with you.
The unexpected decline in CPI (Consumer Price Index) means that the price increase is lower than expected, that is, the inflation rate is lower than market expectations.
1. Monetary policy: The central bank may relax monetary policy and postpone or reduce interest rate hikes. This is usually good for the virtual currency market because loose monetary policy will increase market liquidity and reduce financing costs.
2. Market sentiment: Lower-than-expected inflation data may lead to reduced investor concerns about economic growth, which in turn increases investment interest in risky assets (including virtual currencies).
3. US dollar trend: Low inflation may lead to a weaker US dollar, which is a positive factor for virtual currencies denominated in US dollars (such as Bitcoin) because their value relative to the US dollar will increase.
4. Safe-haven demand: If falling inflation is seen as a signal of economic slowdown, some investors may transfer funds from riskier assets such as stocks to alternative assets such as virtual currencies to diversify risks.
Summary: The unexpected decline in CPI is usually good for the virtual currency market. You should have seen the market trend last night. Now, because of Powell's statement that interest rates should be maintained, not cutting interest rates has turned into negative news and an avalanche.
Operations should be cautious.
