CPI Report on Knife Edge as Bitcoin Faces Inflation Catalyst

The July US jobs report showed a decline in employment, with 23,000 jobs lost. This comes at a time when pessimism remains elevated, making the upcoming July CPI report crucial for investors. The Federal Reserve's September rate hike expectations are almost perfectly divided, with CME FedWatch data putting the odds of holding rates steady at 52.1% against 47.9% for a hike.

A soft inflation print is expected by Wall Street, with a survey of 15 banks predicting July headline inflation to rise 0.12% to 3.4%. Core CPI excluding food and energy is expected at 0.22%, according to HSBC. If this view holds, the bank expects Treasury yields to decline and rate hike bets to fade.

However, a hotter-than-expected July CPI reading could strengthen the case for another Fed hike, putting renewed pressure on stocks, bonds, and crypto. For Bitcoin, the immediate question is whether inflation provides relief or another reason to sell. With oil still reacting to developments around the Strait of Hormuz, markets have very little room for error.