Softer data strengthens expectations of rate cuts, with Thursday’s CPI release set to be decisive.
The U.S. Producer Price Index (PPI) for August fell to 2.6 percent year-over-year, well below forecasts of 3.3 percent. Core PPI eased to 2.8 percent, compared to expectations of 3.5 percent.
On a monthly basis, PPI inflation turned negative, marking only the second decline since March 2024. The release points to easing price pressures in the U.S. economy and strengthens expectations for a rate cut at the Federal Reserve’s September 17 meeting.
Attention now shifts to the Consumer Price Index (CPI), due on Thursday. Economists expect an annual increase of 2.9 percent, up from 2.7 percent in July.
A reading below expectations would reinforce the view that inflation is moderating and raise the likelihood of multiple interest rate cuts into the end of the year. A reading above 2.9 percent would reduce those chances and could trigger risk-off moves across equities, cryptocurrencies, and precious metals.
According to CME FedWatch data, markets are currently pricing in a 92 percent probability of a rate cut from 4.5 percent to 4.25 percent next week, and an 8 percent probability of a deeper cut to 4.0 percent.
Lower interest rates typically push capital away from bank deposits and bonds and into assets such as cryptocurrencies, gold, silver, and growth equities. Current market pricing suggests a 75 percent probability that the Fed funds rate will fall to 3.75 percent or lower by year end.
Bitcoin has been consolidating since its all-time high of 124,500 dollars on August 14. The decline that followed created a pattern of lower highs and lower lows, consistent with controlled profit-taking.
At present, resistance is forming near 117,300 dollars, the August 22 high, and at 120,000 dollars, which is considered a critical psychological level. If inflation data comes in softer than expected, Bitcoin could retest these levels and potentially break higher.
On the downside, support rests at 107,200 dollars, the low from September 1, with a further floor at 105,000 dollars. A stronger-than-expected CPI result could send Bitcoin back into this lower zone and increase the risk of a sharper correction.
The S&P 500 remains above its pivot level of 6,500 points, supported by expectations of monetary easing. Immediate resistance can be seen at 6,600 points, while the next psychological milestone is 7,000 points if conditions remain favorable.
Support is located at 6,450 points, with stronger protection at 6,400 points. A softer CPI reading could allow the index to push through 6,600 toward fresh all-time highs. If CPI surprises to the upside, the index risks slipping back below the 6,500 zone.
