Bitcoin (BTC) heads into the end of July juggling volatility catalysts as the Federal Reserve reacts to US inflation.
Key points:
The Fed will deliver its latest decision on interest rates as US bond yields spike, with markets seeing a September hike as likely. June PCE inflation is due on Thursday after hitting a three-year high of 4.1% last monthSigns of a shift in the equities uptrend places the focus on Bitcoin’s macro correlation.Whales exchange inflows cool by 44% since June
Markets remain split on rate outlook
Attention turns once more to the US Federal Reserve this week, with the Federal Open Market Committee (FOMC), chaired by Kevin Warsh, set to announce its latest interest rate decision on Wednesday, July 29.
A combination of geopolitical tensions and persistent inflation pressures has reshaped expectations for Fed policy and put the possibility of further rate hikes back on the table as the US 2-year Treasury yield climbed to 4.3% last week. The latest data from the CME Group’s FedWatch Tool currently sees a 31% chance of a hike this week, with a hike at the September meeting having odds as high as 50%.
Fed target rate probabilities (screenshot). Source: CME Group
These rate hike expectations were tempered slightly as oil prices dropped 8% in the early hours of Monday as the US and Iran paused strikes. Rate hike odds therefore shifted from 37.4% to 33.7%. Ongoing developments in the Middle East thus continue to introduce volatility into the macroeconomic outlook, even as PPI inflation data released earlier in the month came in below expectations.
Fed target rate probability comparison for July FOMC meeting (screenshot). Source: CME Group
Commenting, trading resource Mosaic Asset Company also noted a pending upward breakout in 30-year bonds. Although the long end of the bond curve now plays a diminished role in funding the US government, this could notionally add to pressure on Warsh as he shapes his language at the post-FOMC press conference.
“The 30-year Treasury yield is also testing a key breakout level once again. In May, the 30-year yield saw a false break above the 5% level which has served as…
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