Bitcoin price soars after unexpected inflation news from the US

New inflation figures from the United States are bringing some relief to the financial markets. Producer prices have risen slightly less sharply than expected, resulting in green figures on the stock tickers. Bitcoin (BTC) benefits the most.

Following Tuesday's higher Consumer Price Index (CPI), the market was also due for a positive surprise. The U.S. Bureau of Labor Statistics (BLS) has just released the Producer Price Index (PPI) for October. This is seen as a precursor to the CPI, which came in lower than expected on several fronts.

At first glance, inflation is cooling down, but this is mainly due to energy. After the record surge in September, energy prices remained virtually unchanged in October (down 0.1 percent). Underneath, the pressure continues unabated.

Food prices rose by 1.3 percent, and transportation and storage costs increased by 2.0 percent, mainly due to higher freight rates. On an annual basis, the PPI is even at its highest level since November 2022.

Following Tuesday's higher CPI figures, the probability of an interest rate hike surged from 84 percent to 100 percent, and that has not changed now. 88.2 percent of the futures market expects a standard increase of 0.25 percentage points, and 11.8 percent anticipates an increase of 0.25 percentage points.

The two-year interest rate has now fallen somewhat. At the moment, it is about 0.40 percent lower than at the time of publication (at 2:30 p.m. our time). This interest rate reacts strongly to what investors expect from the Fed, but it is far from a major movement.

At most, the market is slightly reducing the likelihood of a 50-basis-point hike, but almost no one doubts the hike itself. In that respect, therefore, little has changed.

The next test will be on November 25 with the PCE inflation figure, the inflation gauge to which the Fed assigns the most weight.

Last week, the jobs report already showed that the U.S. labor market was in better shape than expected. This gives the central bank ample room to focus on inflation, and Chairman Kevin Warsh has often stated his intention to achieve the 2% target.

This is not particularly favorable for investors, as higher interest rates withdraw liquidity from the market, while government bonds become more attractive.

As mentioned, Bitcoin responds best to the figures, but the cryptocurrency has also experienced the biggest decline.

Bitcoin surged by over 1.40 percent in a short period, but then took a step back.

Gold also initially made a strong surge, but the entire increase has now been reversed.

Wall Street initially reacted with a slight rise, but there too, prices are already falling again. However, the futures of the S&P 500 and the Nasdaq 100 are still slightly up.