PPI Data Sparks Crypto Rally, But Economists Fear Tariff Fallout

The United States Bureau of Labor Statistics released the Producer Price Index (PPI), which is a crucial measure of inflation. According to Tuesday’s report, the wholesale prices increased less than expected in December, a positive sign for the economy as fears that the inflation is not falling fast enough to guarantee a rate cut towards 2 percent.

The Core PPI, which measures the change in price for finished goods and services sold by producers apart from food and energy, was flat at 0 percent, whereas analysts estimated 0.2 percent. Similarly, the monthly PPI came in lower than projected at around 0.2 percent compared to the consensus of 0.4 percent.

Impact on the US Dollar Index

Following the PPI data, the US Dollar Index (DXY) retracted from the crucial psychological resistance level of around 110 to hover around 109 on Tuesday during the mid-New York season.

The US Dollar Index is expected to experience heightened volatility in the coming weeks as the country changes political direction under Trump’s administration.

Furthermore, the Trump administration has hinted at international tariff hikes to promote local companies and businesses. 

“A small victory today on the inflation front, and it is the incoming president-elect’s policies that can either continue the progress on inflation or worsen it,” Chris Ripkey, top economist at FwdBonds, noted. 

Market Picture

While the slight inflation victory does not guarantee a rate cut later this month, the cryptocurrency market rebounded on the weakening US dollar. After initiating several rate cuts since September last year, the US Federal funds rate stands at 4.5 percent.

As for the cryptocurrency industry, the next few weeks will be a huge pivotal moment amid the ongoing bull rally. The high-impact news will significantly impact the overall macro-bullish momentum.