Bitcoin continues falling trend after expiring inflation figures

The American consumers continue to spend money, despite stubborn inflation and a cooling labor market. New figures for July show an increase in spending by 0.3 percent, exactly as analysts had expected. This increases the chance that the Federal Reserve (FED) will lower the interest in September.

Inflation figures in line with expectations

According to the Bureau of Economic Analysis, the core-PCE index, the Fed’s favorite inflation meter, increased by 0.3 percent on a monthly basis and 2.9 percent on an annual basis. Both figures came out exactly as provided. This keeps inflation above the objective of 2 percent, but there seems to be room for relaxation now that the labor market is further weakened.

FED chairman Jerome Powell already hinted during Jackson Hole last week that an interest rate reduction is likely in September. Fed Gouverneur Christopher Waller also indicated that he wanted to reduce the interest with 25 basic points and even counts on several reductions within six months.

Investors count on interest reduction

In the financial markets, the chance of an interest rate reduction rose to more than 84 percent in September, according to data from LSEG. American stock futures limited their losses after the publication of the inflation figures, while interest on government bonds decreased slightly.

The higher costs for services, such as portfolio management and entertainment, still caused upward pressure on inflation in July. Nevertheless, the FED seems to be increasingly focusing on protecting the labor market, which in recent months weakened with historically low job growth.

Bitcoin and Ethereum respond briefly

Bitcoin (BTC) made a short jump up towards $ 111,600 shortly after the publication of the figures, but quickly fell back and is now trading below $ 110,000. This continues the coin of the downward trend of recent days.

Ethereum (ETH) showed the same pattern: a short revival up to $ 4,440, followed by a correction. ETH is now acting around $ 4,330, still well below the peak of $ 4,966 that was reached earlier this month.

Outlook

All eyes are now focused on the American job report that will be published next week. If it shows again that the labor market is weakening further, an interest rate reduction by the Fed seems almost certain. For the cryptomarkt that can be an important catalyst, although the recent volatility indicates that investors remain careful for the time being.