U.S. inflation rate came negative in June, thereby enhancing hopes of a potential interest rate cut by the Federal Reserve in September. The development sent Bitcoin’s price surging past $59,000. Despite the gain, traditional markets like stocks and gold also registered an increase in their value but all eyes are now on the Federal Reserve, which is continuing to remain very cautious about its next step with the economic situation under close watch.

A surprising drop in June marked the decrease of inflation in the United States. Indicators showed that consumer prices actually fell 0.1 percent, while most individuals had anticipated a slight gain of 0.1 percent. In May, the rate remained flat at 0.0 percent. The broad CPI gained 3.0 percent over the last year, below an expected 3.1 percent and May’s reading of 3.3 percent.

The Core CPI, excluding food and energy costs, did better than expected. It rose 0.1% in June, compared to the expected 0.2% increase and May’s 0.2% rise. On a yearly basis, the Core CPI surged 3.3%, barely below the 3.4% forecast and June’s 3.4%.

Bitcoin and Traditional Markets Respond

Immediately after the CPI report release, Bitcoin’s price nearly instantly surged to $59,100, up nearly 2 percent in the last 24 hours. Other traditional markets also benefited from the news: U.S. stock index futures moved higher, while the 10-year Treasury yield fell to 4.20%. Gold prices edged up 1 percent to $2,404 per ounce.

Potential Federal Reserve Rate Cut

Before this report, with the ongoing decline of the core personal consumption expenditures price index, many began to believe that the U.S. The interest rate of the Federal Reserve may be cut this mid-September. According to the CME FedWatch tool, more than 70% is the chance that this will happen. It is from less over than 50% from last month. Fed Chair Jerome Powell did not say this will be the case during his recent testimony before Congress, nor did he say it will not be. In his testimony, he had stated that ‘there’s been some softening on the labor data,’ and also, the Fed is really paying more attention to the risks facing the economy. He, however, remained steadfast that the Fed needs to have sufficient evidence that inflation is returning to its 2% objective before they even remotely think about a rate cut.

Bitcoin’s Battles and Market Moves

Bitcoin has been under extreme pressure of late. It reached its all-time high of more than $73,500 in the first quarter, but then it started falling. While they were few buying it in the second quarter, at moments many were selling it. A large supply from government sales and the return of Mt. Gox tokens pushed its price below $54,000 late June and early July, nearly 27% below its record high.

This decline in the digital currency’s price was quite frustrating for the bulls of Bitcoin, particularly because other risk assets, like U.S. equities, just kept on trucking. As a matter of fact, the S&P 500 and Nasdaq finished yesterday their seventh day in a row of gains by hitting new record highs.

Conclusion

The new inflation report bumped up the odds of a September rate cut to 87% and the likelihood of two or more rate cuts by November to almost 50%. The U.S. dollar index dropped nearly 1%, which was a big swing for that metric. It remains to be seen whether this news will prompt a new surge in the price of Bitcoin.