Market deep dive: Monthly CPI in the US higher than expected

This week, the market focussed once again on the release of the monthly CPI in the US, which ended up being above expectations, with 1.3% (MoM) and 9.1% (YoY). Core inflation, excl. food & energy, was also higher than expected. As a result, the market is now pricing in a 50% chance of a 100bps rate hike for the next FED decision at the end of this month.

The Bank of Canada also surprised the market with a 100bps rate hike; 75bps were expected.

At the beginning of the year, before the war in the Ukraine, this would have been considered virtually impossible. In current times, it is not shocking the markets so much anymore, as hopefully most of it is priced in.

On a positive note, commodity prices have decreased significantly from recent highs, and oil is now trading well below USD 100. This will eventually be reflected in future CPI prints.

One hot topic currently, which might heat up in the near future, is the development of the Russian gas supply in Europe. Nord Stream 1 is undergoing annual maintenance at the moment and there is a discussion if the delivery of a turbine from Canada to Russia is in conflict with sanctions. In a worst case scenario, Russia will not resume the delivery of gas to Europe and will make it conditional on the relaxation of western sanctions. Analysts agree that if the Russian gas supply ends, Europe would dive into a deep recession, and markets would crash to new lows.

BTC$ and ETH$ are both trading slightly lower compared to a week ago and continues trading in a relatively tight range. DeFi, on the other hand, performed well this week: UNI (+23%), AAVE (+ 22%), and CRV (+14%).

Yesterday, Circle published their first monthly breakdown of their USDC assets as of end of June in a push for more transparency, and likely to fight some rumours on Twitter about the quality of the reserve assets. About 75% of the USDC in circulation was backed up with U.S. treasury securities (maturities ranging from July 5th to September 29th), and the remaining was held as cash at regulated financial institutions.

Lastly, there has been a steep increase in wallets that hold more than 1 BTC according to lookintobitcoin.com. There are now a total of 884,309 wallets, which is an annual increase of 84,800 wallets or +10.6%, might indicate retail investors are purchasing BTC.

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