The US released the Consumer Price Index (CPI) last night, which has attracted much attention from the market. The report showed that the US CPI rose by 2.9% year-on-year in July, falling for the fourth consecutive month and returning to the "2-digit" for the first time since March 2021. The inflation data was in line with market expectations. Although it strengthened the market's expectations for the Federal Reserve to cut interest rates in September, it also reduced the possibility of a sharp 50 basis point cut in interest rates.
After the data was released, the market had a series of reactions. The US dollar index fell first and then rose, and finally closed slightly up 0.01%; the pound fell 0.25% against the US dollar; the US dollar rose 0.33% against the Japanese yen. As the market bets that the Federal Reserve will cut interest rates more than the European Central Bank this year, the euro strengthened and hit an eight-month high. After opening higher, the three major US stock indexes all turned lower in early trading, but eventually closed slightly higher, with the Dow Jones Industrial Average up 0.61%, the S&P 500 up 0.38%, and the Nasdaq up 0.03%.
In the international market, oil prices fell across the board, mainly due to an unexpected increase in crude oil inventories. However, geopolitics remains the focus of the market. A new round of Gaza ceasefire negotiations will be held in Doha on the 15th, and Hamas refused to participate. Affected by this, US oil fell 1.44% and Brent fell 1.03%. The precious metals market was also under pressure. The spot gold price once rose to $2,480 in the short term, less than $4 away from the record high set last month, but then gave up the gains and closed down 0.72%. Silver prices also fell 1.03%.
The cryptocurrency market experienced sharp fluctuations after the release of the CPI data. Bitcoin and Ethereum rose briefly after the data was released, but then quickly fell back. Bitcoin once hit $61,839, but due to the surge in selling pressure, it quickly fell below $60,000 and is currently trading at $58,440, down 4.55% in 24 hours. Ethereum has a similar trend, reaching a high of $2,784 before falling rapidly. It is currently trading at $2,653, down 2.55% in 24 hours.
There may be multiple reasons for the abnormal performance of the crypto market. On the one hand, the market had already expected the Fed to cut interest rates, and the announcement failed to bring new stimulus, but instead triggered profit-taking behavior by some investors. Some large holders may use this good news to sell assets at high levels, causing prices to fall sharply. On the other hand, the US government transferred 10,000 bitcoins from a wallet address related to Silk Road to Coinbase late last night, which triggered market concerns that bitcoin may be sold in large quantities, further suppressing market sentiment.
The CPI data for July continued the trend of a sharp decline in inflation, making it almost certain that the Fed will start cutting interest rates in September. As for whether the rate cut will be 25 basis points or 50 basis points, the market still needs to observe the weekly initial unemployment claims and the August non-farm payrolls report to be released on September 6. According to the Fed Watch tool of CME, the market currently believes that the probability of the Fed cutting interest rates by 25 basis points in September is 56.5%, and the probability of cutting interest rates by 50 basis points is 43.5%.
The release of the CPI data and the market reaction once again reflect the complexity and variability of the market. Although macroeconomic data and policy expectations have an important impact on the market, factors such as investor behavior, market psychology and external events cannot be ignored. While investors are cautious, they may reduce overall risk through diversified investments. For example, instead of concentrating all funds on a single industry, you can trade foreign exchange, buy US stocks/indexes, invest in bulk gold and other assets with different risk levels on a one-stop trading platform like 4E. 4E has launched more than 600 asset trading pairs and supports long and short transactions with a thousand times leverage. Through such diversified investments, even if some assets perform poorly, the good performance of other assets can balance the overall risk and return to a certain extent.
