U.S. consumer inflation came in relatively mild in July, but Bitunix said the data is not enough to remove longer-term funding cost pressure building across global markets.
According to BlockBeats on Aug. 13, U.S. CPI for July rose 0.1% month over month and 3.4% year over year, while core CPI increased 2.5% from a year earlier. Falling energy prices offset part of the upward pressure from housing costs.
After the release, market pricing for a Federal Reserve rate hike in September dropped from about 50% to around 40%, which eased short-term policy pressure. Bitunix said that shift gives the market some breathing room, but does not directly translate into a dovish outlook.
Fiscal supply and long-end yields remain the main constraint
The firm said the U.S. fiscal deficit is still widening. Over the first 10 months, the cumulative deficit was close to $1.8 trillion, total U.S. debt was nearing $40 trillion, and interest expenses continued to rise. That backdrop means the Treasury still needs to issue large amounts of debt.
Bitunix pointed to the latest Treasury market signals as evidence that long-term funding costs are still moving higher. The 10-year Treasury auction yield climbed to its highest level since 2007, and the 30-year yield moved closer to 5.25%.
In Bitunix’s view, the key question for the U.S. rates market is no longer only whether the Fed will raise rates in September. The bigger issue is whether long-dated yields will keep rising because of fiscal deficits and Treasury supply even if the Fed leaves policy rates unchanged. That also means financial conditions may not improve in step with any decline in the policy rate. For highly valued and highly leveraged assets, long-end yields remain an important source of pressure.
Yen moves and Japan policy expectations
In Asia, the yen moved back near the 160 level, while Japan’s July PPI rose 7.2% year over year. Bitunix said that has strengthened expectations for a Bank of Japan rate hike in September.
If Japan moves further toward policy normalization and the rate gap between Japan and the U.S. narrows, global asset allocation flows and yen carry trades could both be affected.
Gold support may be tactical for now
Bitunix said gold has regained support as tail risks of additional rate hikes eased, the U.S. dollar weakened, and fiscal uncertainty resurfaced. Even so, the firm described the move as closer to a tactical rebound driven by rate expectations than a straightforward rate-cut trade.
The Jackson Hole meeting, along with upcoming inflation and employment data, will determine whether gold can extend its gains, according to the analysis.
Russia-Ukraine conflict adds energy and food risk
Bitunix also said the Russia-Ukraine conflict is bringing energy and grain supply risks back into focus for global markets. Russia and Ukraine have recently continued attacks on Black Sea ports, energy facilities, and merchant ships, while Ukraine is in its peak grain export season.
If Black Sea shipping faces more disruption, wheat and related food prices could rise. That, in turn, would make already existing energy inflation risks more complicated.
Bitcoin traders should watch liquidity and long-end rates
Overall, Bitunix said July CPI reduced the pressure for an immediate Fed hike, but did not remove the funding cost constraints created by the combination of high U.S. deficits, high debt levels, and elevated long-end yields.
The next phase of global asset pricing is likely to center on the pull between two forces: whether inflation continues to cool, and whether fiscal supply pushes long-term interest rates higher. For volatile assets such as Bitcoin, Bitunix said near-term attention should stay on U.S. dollar liquidity and long-end Treasury yields rather than on the Fed’s policy rate alone.