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Bitcoin nears $27K despite ‘hot’ PCE data sparking June rate hike bets

Bitcoin nears $27K despite ‘hot’ PCE data sparking June rate hike bets

Bitcoin (BTC) experienced sudden gains at the Wall Street opening on May 26th after United States macroeconomic data revealed negative news.

BTC/USD 1-hour candle chart on Bitstamp. Source: TradingView

Bitcoin Remains Unaffected by New U.S. Inflation Numbers

BTC/USD reached almost $27,000 on Bitstamp according to data from Cointelegraph Markets Pro and TradingView.

The pair unexpectedly rose after the day’s Personal Consumption Expenditures (PCE) data revealed it to be the first rise since October 2022. Such data would typically present a headwind for risk assets, including cryptocurrencies, as it suggests that inflation remains persistent and further financial tightening may be necessary to control it.

“This is a major setback to the Fed’s fight against inflation,” wrote financial commentary source The Kobeissi Letter in response to the news. Kobeissi also noted that expectations for interest rate hikes from the Federal Reserve were “shifting rapidly” thanks to the PCE event.

CME Group’s FedWatch Tool showed that the market currently favors a fresh hike in June, whereas before it was more than 80% certain that there would be a pause.

Fed target rate probabilities chart. Source: CME Group

Financial commentator Tedtalksmacro also acknowledged that the PCE gains were relative, stating that “US PCE data came in hot, above analyst expectations. However, on a 3-month annualized basis, core PCE printed sharply lower… down to 4.2%,” in response.

Traders experienced a sense of relief due to news that the Biden administration was nearing a deal on the debt ceiling, with the deadline looming.

At the time of writing, the S&P 500 and Nasdaq Composite Index rose by 1% and 1.65%, respectively.

DXY Reaches 10-Week Highs

Regarding Bitcoin itself, Michaël van de Poppe, founder and CEO of trading firm Eight, indicated that there is potential for upside continuation.

Related: Bitcoin losing its 200-week trendline puts $20K in play — BTC price analysis

“That’s step one for Bitcoin, as we reclaim $26,600 and are looking for continuation towards the range highs,” he interpreted on the day’s price action.

“If the recent correction is a deviation, we might break to $29,000 next week.”

BTC/USD annotated chart. Source: Michaël van de Poppe/Twitter

Van de Poppe cautioned that PCE was “not a great sign” for risk assets as it traditionally implies a knee-jerk reaction for United States dollar strength, which is inversely correlated with crypto.

The U.S. Dollar Index (DXY) reached 104.4 on the day, its highest level since March 17th.

“Some consolidation following this month’s rally would be healthy for the dollar,” wrote popular trader Justin Bennett in a dedicated forecast.

“But a daily and weekly close above 104.20 opens up 105.00 early next week. The only thing that would turn me bearish on the DXY is a daily close below 103.50.”

U.S. Dollar Index (DXY) 1-day candle chart. Source: TradingView

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.