Macro News:

The year-on-year CPI growth in the United States in March, which was announced last month, exceeded expectations, and the month-on-month growth rate has been higher than expected for five consecutive months. The three-month core CPI growth rate also exceeded expectations, severely impacting the market's expectations for interest rate cuts. After the meeting last week, Federal Reserve Chairman Powell denied the likelihood of a rate hike in the near future, but the signal conveyed indicates that the timing of a rate cut is more uncertain. Journalist Nick Timiraos, known as the "New Fed News Agency," subsequently wrote that the market no longer considers the Fed's inclination to be as important, and that economic and inflation data are more crucial.

Following the Federal Reserve meeting, the heavyweight inflation data for April CPI, which will be released next Wednesday, will be the first to be announced. Will the CPI once again grow faster than expected, undermining market confidence in interest rate cuts?

Steven Englander, Chief Foreign Exchange Strategist at Standard Chartered Bank, recently reported that closely observing housing costs, especially the housing inflation-related indicators in the CPI—such as owner-occupied rent (OER)—would lead to the optimistic expectation that housing inflation may soon decline, thereby pulling down core inflation. Powell's confidence in the potential decrease in future housing costs after last week's meeting is evident.

The abnormal rise in OER in the first quarter of this year is expected to face downward pressure in the coming months, and this downward pressure "may be sharp." Englander predicts that the average OER inflation in the second quarter will only grow by 0.29% month-on-month, which is not far from the general magnitude from 2015 to 2019, and is a slowdown from the 0.48% quarter-on-quarter growth in the first quarter of this year. This is significant because OER accounts for 33% of the core CPI, so a slowdown in the predicted growth rate of OER will cause the core CPI to decrease by 0.06 percentage points month-on-month. This means that if more components of the CPI experience cooling inflation, the core CPI growth rate may be 0.3% lower than expected, slowing to 0.2%, or even lower.

This slowdown in OER will encourage expectations that inflation will resume its decline, and the magnitude of the decline is sufficient to prompt the Fed to begin cutting rates. Englander noted that he was surprised by Powell's confidence in housing inflation, given the high OER inflation in the first quarter. Furthermore, Powell seems to no longer focus on the so-called super core inflation—excluding food, energy, and housing rent services—and instead is paying attention to the reduced rental inflation as a sufficient reason for rate cuts, which also surprised him.

Market Expectations:

Regardless of the CPI results, it is expected that the cryptocurrency market may rebound. The decision on the U.S. spot Ethereum ETF is crucial for the token market. Bitcoin still dominates the market, which may affect tokens, especially in a very unstable market.

Recently, the cryptocurrency market has been somewhat unstable, especially after the fourth Bitcoin halving. In the past 24 hours, the total value of all cryptocurrencies has dropped by over 3%, reaching approximately $2.4 trillion as of Wednesday, making it difficult for Bitcoin supporters to control the market. The current market calm may bring about a lot of volatility in the coming weeks.

Furthermore, more large investors joining through the spot Bitcoin ETF may make the situation even more unpredictable. If the U.S. does not approve the spot Ethereum ETF, it may make the token market even more challenging. However, ultimately, the U.S. may approve them before the next major election.

In the coming weeks, the cryptocurrency market may continue to be unstable until some solid support levels are found. Therefore, for cryptocurrency investors, especially those trading derivatives, caution is advised to avoid losing all funds. For long-term investors, the next few weeks may be a good time to buy more cryptocurrencies, as the market begins to rise again.

Although the overall market is relatively weak at the moment, May is a period of adjustment and testing, as well as an opportunity for intervention. If the weakness continues to decline, do not panic excessively. Despite the rejection of the Ethereum ETF, it may be a gimmick reserved for speculation in the future, and in the long run, there is good growth potential, and the ETF approval is only a matter of time.

Article publication review has a time delay, and the market is ever-changing. The above suggestions are for reference only and carry inherent risks! Market conditions change daily, and all I can do is provide some slight assistance based on my years of practical experience, guiding everyone's investment decisions and management in the right direction. Meeting is fate, and I am a believer in fate. If you have any doubts or questions in the currency circle, you can pay more attention to Zhou Yueying, and I believe it will be helpful to you.

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