#AugustCoreCPIBeatsExpectations
The August core CPI report presents a mixed picture that increases the risk of short-term headwinds for risk assets.

Impact on September Fed Rate Hike Probabilities

Yes, the rise in monthly core CPI reinforces expectations for tight monetary policy.

Headline vs. Core Inflation: While headline CPI (0.4% monthly; 3.4% annual) and annual core CPI (2.4%) came in line with forecasts, the 0.3% monthly increase in core inflation exceeded the expected 0.2% rate. Since the Federal Reserve places significant weight on monthly core trends to assess underlying price stickiness, this 0.3% monthly rise—the highest level since May signals a potential hurdle in the underlying disinflation process.

Shift in Market Pricing: Driven by higher-than-expected Producer Price Index (PPI) data (a 0.4% monthly rise) and the continued strength of Brent crude oil prices, there was significant activity in interest rate futures markets. Market expectations (probability) for a 25-basis-point rate hike at the upcoming FOMC meeting rose to the 85%–90% range.

*Impact on US Treasury Yields: Reflecting expectations for tighter policy and a higher terminal interest rate, the yield on the US two-year Treasury note climbed toward the 4.61% level.

Pressure on Bitcoin (BTC)

*Yes, Bitcoin is facing structural resistance and short-term downward pressure.

*Liquidity and Opportunity Cost: Rising bond yields and a strengthening US dollar increase the cost of holding non-yielding, speculative assets like cryptocurrencies.

Volatile Price Action: BTC experienced sharp fluctuations immediately following the data release; as investors assessed the report's mixed signals—annual core inflation easing to 2.4% versus monthly core inflation exceeding expectations at 0.3% the price briefly dipped to the $76,700 level before recovering toward $77,400 Over $700 million in leveraged crypto positions were liquidated during this market volatility.
Critical Levels to Watch:

Support ($76,000–$77,000): Holding above this range prevents a deeper pullback toward critical demand zones located lower down. A sustained break below the $76,000 level would signal a continuation of the pullback driven by macroeconomic factors.

Resistance ($79,000–$80,000): To regain upward momentum, BTC needs to break back above the $80,000 level, where significant sell-side liquidity resides. ---

Overview

While the continued deceleration of annual core CPI toward the 2.4% level presents a positive long-term picture, the current volatility in monthly core inflation ensures that the Fed will maintain a hawkish stance ahead of its policy meeting. Until interest rate expectations stabilize and Treasury yields ease, Bitcoin is expected to trade within a specific range, likely exhibiting a defensive bias.

$BTC