U.S. inflation drops to 3.3%, beating forecasts

U.S. inflation dropped to 3.3% in May, raising hopes for early interest rate cuts. This positive development boosted both the stock market and President Joe Biden’s PR. The data came in slightly below what economists had expected.

Also Read: Federal Reserve Is Struggling To Make Sense of U.S. Inflation

U.S. stocks opened at record highs following the release of the inflation data. Treasury yields dropped as investors anticipated more interest rate cuts this year. The S&P 500 surged by 1.1%, hitting a record intraday high of 5,436.89 during early trading. Meanwhile, the Nasdaq Composite rose by 1.6%.

US’s inflation cools off

The 3.3% rise in headline CPI for May was a positive surprise, just below the expected 3.4%. Core CPI, which removes the volatile food and energy prices, also showed positive signs by remaining at 3.4%, below the forecasted 3.5%. The data also revealed that monthly headline inflation was zero, indicating stable price levels. The core CPI increased by 0.2%, indicating mild inflationary pressures in other sectors.

Traders in the futures market increased their bets on a rate cut in September, ahead of the presidential election. The odds for this rate cut rose to 84%, compared to 60% before the inflation data was released. Investors are now fully pricing in two quarter-point interest rate cuts this year.

Also Read: U.S. inflation fight’s final stretch

Previously, the expectation was between one and two cuts. President Biden welcomed the figures as “progress on lowering inflation,” noting that inflation is now “nearly two-thirds from its peak.” He also highlighted that core inflation is at its lowest since April 2021.

Crypto markets spike

As soon as the CPI data came out, crypto markets saw a remarkable surge. Bitcoin went from $67K to $69K in a matter of minutes. Though they remain predominantly bearish in the short term, all cryptocurrencies in the top ten have seen an increase today. This demonstrates the potential for quick rebounds based on economic data.

This uptick offers a brief respite from the recent downtrend and hints at the volatility that continues to characterize the crypto space. Moreover, the data sets the stage for Bitcoin to complete a perfect inverse head and shoulders pattern. This technical formation suggests a strong bullish reversal, and many analysts believe a “giga candle” is inevitable. If this pattern holds, we could see the strong bull run this year has promised.

Cryptopolitan reporting by Jai Hamid