After the release of the CPI data last night, the long-standing macro mood has changed. Instead of merely expecting a 75-basis-point interest rate hike in September, it has begun to pessimism, even that inflation has not peaked. Of course, this is not unreasonable. Six months of rate hikes have not led to a noticeable drop in inflation from its high point. Although this can be interpreted as a lag in the Fed's rate hike, the public is not paying the price. As many of our little friends have seen, the September rate hike is now not only 75 basis points, but even the possibility of a 100 basis point hike has now come out, even as high as 20% at one point. A 100 rate hike in September, however, is far too low and 75 is the most likely outcome, but will come with the question of whether the last three rate hikes in 2022 will be enough, and whether the Fed will hold an ad hoc meeting in October. Yesterday's tweets were analyzed, and even a 0.5% reduction in the CPI is likely to keep inflation at about 2% by this time next year, and it is unlikely to be even lower than 2%. After yesterday's CPI data came out, it was only 0.2% year-on-year, but only 0.1% higher than the previous month. Core CPI was up 0.4% year-on-year, which is yet another indication that the US recession, while expected, is still not enough.
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Food, energy, and leisure inflation fell relative to the previous month (quarter-on-quarter) in terms of the volume of change in the consumer price index. All of the rest continued to rise. And, in the three-month comparison, inflation in new cars and health care even exceeded June's figures, the highest in nearly three months, and for the highest-inflation category of housing (between 30% and 40%), an increase of more than 50% relative to the July figure.
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And the oil that you're more familiar with, actually, is providing a CPI that's basically at the upper end of the spectrum, unless you can solve the problem from the supply chain side, where the 80-dollar refueling is likely to be at the bottom, and the two-oil price, which was lower when the CPI was released, was actually at 1:30 a.m. when Biden announced that he would be buying oil for reserve at a cost of 80 dollars, directly raising the price. To be honest, this wave of Biden's operation is really hard to understand. It almost tells the market that 80 US dollars is the bottom of the oil price, and the US government will buy oil at 80 US dollars. Although the quantity of the purchase has not been announced, this undoubtedly limits the scope for oil prices to fall for already high oil prices. It is already the middle of September, to know that the average price of oil prices is only equal to that of August, and even a slightly higher possibility cannot be ruled out. The October CPI is thus expected to be even more dismal, with a depression likely to drive down food prices; And yet there is no sign of a decline in housing; Manufacturing data are already poor, and expectations of a recession are likely to be worse; The introduction of a health-care "wealth-for-poverty law" should help to slow spending by the elderly and low-income; There is a downward trend in both new and used cars, especially used cars, but this is missing. But the shortage of chips has been heard to be less severe, so prices could fall; Transport services are not easy to judge, but seeing the Baltic Dry Index (BDI) rising, there is a good chance that it will not be able to provide too much; And leisure, it's easy to say, no one has any money left, so stay home and play single-player games. The final educational communication is not obvious.
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So it's almost a safe bet that the October CPI number will fall, as it is now, and that there is no way to ask for a bigger decline. The Fed's rate hike will serve only to dampen the economy and reduce the appetite for buying, so back to the front lines, the Fed will choose to meet in October for an interim meeting to get an additional rate hike. This depends on the choice of terminal rates. With no Fed official to speak before the September rate hike is announced at 2am next Thursday, the final rate is judged on market forecasts, with a 4% Fed funds rate at the end of 2022 now highly likely and a 75 basis point increase (the official forecast is for a 50 basis point increase in September). A 50-basis-point hike in November and a 25-basis-point hike in December are indeed highly likely, and in that case, there would be no need to use the October meeting, but as I analyzed the other day, a 75-basis-point hike and mid-year rates to 4% at the end of the year, and a 50-basis-point hike in November, are not necessarily good news for November's midterm elections, which are scheduled for Tuesday (November 8) after the first week of November. While a 50-basis-point rate rise would be a relatively predictable start to Fed tapering, Democrats' worst headache should be whether they can extend the upward trend in US stocks that they have not seen in 56 years and stay the same for 60 years. If they do not see gains by December 10, they will be very much in the dark. Imagine if we had a mid-term election where we predicted that the last Democratic Party was the party that put an end to the rally in US stocks after America's 56-year mid-term election, and that it would probably be analyzed every time there is a mid-term election, which is "shameful" for the Democratic Party. So I personally think that a 50 basis point rate hike in November is the best way to judge the relationship between the Fed and the Democrats.
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After the release of the CPI data yesterday, the dollar index jumped directly back up to 109, and did not even give up its attack on 110. But I personally still believe that there is still a limit to how far the DXY can rise. After all, this 75-basis-point rate should be the last big interest rate increase, and as long as the CPI is not higher than 9.1%, the US Federal Reserve will still choose to gradually reduce interest rates, and the rate increase in the Eurozone is just beginning, there is still a chance for the exchange rate to rise. As the dollar index rises, there is a large amount of money continuing to reduce holdings of increasingly illiquid U.S. Treasuries, especially medium- and long-term U.S. Treasuries have broken through the recent record high. Only short-term U.S. Treasuries have shown any signs of buying. This is basically a slap in the face for the Fed's plan to shrink its balance sheet, which is why we don't need to think about shrinking our balance sheet for a while. The Fed has had enough of a capital outflow.
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Although the prices of BTC and ETH have declined considerably due to CPI, in volume terms, purchasing power has been even stronger, i.e., there will be more money at the bottom. In this respect, the entry of outside money is particularly critical, with USDT seeing another modest increase in market value of about $80 million by 8 a.m. this morning, as if it were unaffected by CPI.
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The market value of USDC, which is the main capital of the United States, has undoubtedly decreased by USD 100 million. Compared with more European and Asian users of USDT, the main USDC used in the United States is bound to be affected by macro sentiment, which is also normal. As for BUSD, which recently acted as a stabilizer currency for the market value increase, its market value has continued to increase, adding another USD 120 million to its market value as of 8:00 a.m. this morning, two main stablecoins have been coming in with external funds.
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Only the last day of the ETH merger, DAI's market value remained volatile, dropping $20 million, and the ETH as collateral in the contract could not be accessed voluntarily. If the ETH was to be accessed for forked bets, it would be available in its own Ethereum wallet, and the exchange would have access to some mainstream forked bets, but it would be difficult to obtain them, and issuance would be delayed.
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As has been said before, yesterday's uptick in trading volumes, following the CPI data, means that purchasing power has increased. Looking at the data that have been transferred to exchanges by USDT and USDC as of 8 a.m. this morning, USDT, the main force of the trade, has improved, while USDC is weaker. But it also shows that investors are still buying into the market, both active and passive, with the ETH exchange rate in particular reversing in the early hours of this morning.
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From the point of view of the selling pressure transferred to the exchanges, whether because of CPI or BTC, the selling pressure of ETH has increased greatly. After all, the macro sentiment has changed. The 31,000 in the BTC sell-off were transferred to Huobi before the CPI was announced, and there is no sign of selling, so the tweet last night had already analyzed that the sell-off is likely to be Huobi's own assets, not necessarily for sale.
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From the exchange reflected data, because the BTC in the Huobi of a large number of new stock led to reflect the data not to cover the overall selling pressure, but if excluding this part of the data, the overall purchasing power is still good, and ETH is relatively poor, the purchasing power and selling pressure compared to the difference has exceeded 50%, selling pressure is in the lead position, especially a large number of chips stacked in the exchange.
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So from the stock exchange point of view BTC and ETH are in a larger increase state. BTC, which has been at a four-year low in terms of inventory, has seen a relatively large increase in inventory, but the impact on the overall trend is not great. But for ETH, which itself is in high inventory, it is more risky. After all, the biggest test is the merger of ETH. Such a large accumulation should be cautious.
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Look at the change in sentiment, the CPI's bad results in the decline of BTC and ETH, which has led to the trend of more investors in the BTC choosing to be bearish, and this is understandable. After all, there is no sign of bottoming out before the interest rate hike and the terminal rate announcement, and ETH is not to mention continuing to take large-scale bearish positions. After all, we have enjoyed the benefits of the bearish position, and the merger is also continuing to do so.
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The rise of oil prices, the rise of the dollar index, and the low level of user sentiment are all reflected in the performance of the Nasdaq futures. From the continuous drop that started after yesterday's CPI data release to the present, there are barely any signs that the drop has stopped, but it is not yet confirmed. It remains to be seen whether the only favorable information in the market so far is the expansion of the US federal government budget deficit to $220 billion in August, which is somewhat of a pressure on the Federal Reserve. And finally, I know that there may be some leverage, and I'm cautioning against ETH that I'm keeping a bearish view on ETH, which is to prevent you from making money, and I'm also not analyzing that shorting BTC and ETH is a big deal, so my analysis is crap, it's fine, be happy, but I'm also cautioning that, like not knowing the CPI numbers, the merger is still a question mark, and that high leverage is dangerous in any direction. Take what you want.
