Inflation meeting the target? It's just an 'oil' trick! The European Central Bank seems to be on the verge of victory but is actually being roasted over a fire. Crypto veterans, are you ready to pick up the pieces?
Plain Language Interpretation:
Vincent Stamer, an economist at Deutsche Bank, recently dampened market expectations. He said that although the inflation rate in the Eurozone finally fell to the European Central Bank's coveted target of 2% in June, this good news is unlikely to last long, and it is very likely to turn downward again in the coming months.
Why turn back just after reaching the target? The key is 'oil'!
Stamer revealed the secret: the previous rebound in inflation was entirely supported by oil prices. Back in May, tensions escalated between Iran and Israel in the Middle East, causing panic and a sudden surge in international oil prices by over 10%! When oil prices rise, transportation costs, chemical raw materials, and even the money you spend on gas also go up, naturally pushing overall inflation higher. It's like pumping air into a nearly deflated tire: it looks inflated at 2%, but the valve core might still be leaking, making the foundation unstable.
'Oil' trick comes to an end, inflation may show its true form!
Now? By the end of June, oil prices have slowly started to fall again. Stamer predicts that as the 'booster' effect of oil prices fades, the inflation rate in the Eurozone is likely to 'decline in sync'. This means that the 2% in June may just be an illusion created by oil, and the foundation is not solid.
The European Central Bank's 'Pause Button': Is it all America's fault?
So the question arises: now that inflation has just met the target, should the European Central Bank joyfully announce 'victory over inflation' and start cutting interest rates? Stamer said, not so fast! At the July meeting, the European Central Bank will most likely 'pause' and take no action. Why? The key uncertainty comes from across the Atlantic — the U.S. tariffs!
The news of the U.S. imposing tariffs on Chinese goods is not good for Europe. Why?
Impact on European Exports: The global supply chain is interconnected. U.S. tariffs may affect the costs of Chinese components needed by European companies or make European products lose competitiveness in price when exporting to the U.S. If Europe can't sell its goods, the economy will naturally suffer.
Lowering Commodity Prices: U.S. tariffs could suppress global demand or lead to some goods shifting to the European market, increasing local supply in Europe and thus applying downward pressure on commodity prices. While this may seem to suppress inflation, it signals economic weakness behind the scenes.
Great Sage's Views and Cases:
Brothers, doesn't this plot seem a bit familiar? Following 'false prosperity' comes the expectation of 'policy shift', which is often a breeding ground for market shifts, especially in our crypto circle! Think back to last year when the market was also struggling with inflation, recession, and the Fed's pivot; when expectations heated up, BTC directly embarked on a violent surge.
Stamer's judgment is clear: the temporary meeting of inflation targets relies on oil prices, and once oil prices drop, inflation will stay low. Coupled with the 'black swan' of U.S. tariffs potentially harming the European economy, the ECB is currently hesitant to act, hence the July pause. However, because of this, to cope with the potential economic cold winds, declining exports, and weak demand, an 'autumn interest rate cut' has become almost a certainty! This expectation has already started to ferment.
What does this mean for our crypto circle?
'Water' is coming? The stronger the expectations for major central banks like the Fed and the ECB to pivot to interest rate cuts, the looser the market liquidity expectations will be. Where will the excess money flow? History tells us that Bitcoin and mainstream crypto assets are often one of the 'reservoirs'. Bitcoin, as 'digital gold', is extremely sensitive to these types of expectations.
Risk and Opportunity Coexist: The escalation of the tariff war is indeed a risk that could trigger volatility in traditional markets. But don't forget, sometimes the crypto market can emerge with its own independent trends amid uncertainty, especially when it is viewed as an alternative to traditional systems impacted by tariffs. Think back to the early days of the trade war in 2018, when BTC also had a stellar performance.
Focus on the 'Expectation Gap': The market may currently be trading on 'July ECB pause + waiting for autumn interest rate cuts'. If the economic data in Europe, especially impacted by tariffs, turns out worse than expected in the coming months, or if inflation drops faster than anticipated, then 'interest rate cut expectations' will heat up sharply, possibly igniting a crypto rally. Conversely, if inflation unexpectedly remains stubborn, or if the ECB remains firm, there will be short-term setbacks.
So, folks! This wave of European inflation 'meeting the target' has a lot of fluff; the foundation is too weak! Once oil prices recede, the naked truth will be revealed. With U.S. tariffs looming, the European Central Bank can only 'shrink' in July. But don't rush, the real storm center lies in the expectation of 'autumn interest rate cuts'!
When traditional economies shiver in the cold winds of trade, and central banks are forced to turn on the taps, how do you think assets in the 'digital new continent' will perform? Will they sink along with others, or will they become the ark of a new route?
Keep a close eye on oil price fluctuations, carefully analyze economic data, and anticipate the ECB's shift — the next wave of 'Bitcoin frenzy' may be hidden behind this 'oil' trick of Eurozone inflation! Prepare your positions; we'll settle the accounts in the autumn!
