$ETH

Crypto Market Rallies on Lower CPI and Tariff Easing Despite Fed Uncertainty

Cryptocurrencies are showing resilience amid mixed economic signals, buoyed by a lower Consumer Price Index (CPI) reading and easing US-China trade tensions—even as uncertainty around Federal Reserve policy and the US debt ceiling persists.

The market reacted positively to Wednesday’s CPI report, which showed a 2.4% annual inflation rate, and news of a tariff rollback deal between the US and China. Despite traditionally bearish implications for hedge assets, Bitcoin surged to $103,789, approaching the $109,000 mark, while Ether gained 3%, trading above $2,800.

This uptick comes even as investors continue to grapple with broader macroeconomic concerns, including the impact of a rising US debt ceiling and an uncertain rate path from the Federal Reserve.

Tariff Relief and Inflation Data Provide a Boost

The new trade agreement, announced by President Trump, will roll tariffs back to February 2025 levels, easing trade war fears and removing retaliatory taxes. While the stock market initially responded with optimism, the S&P 500 soon gave up gains—suggesting investors remained cautious about the deal's long-term impact.

In contrast, the crypto market appeared to diverge from traditional assets, with Bitcoin and Ether benefitting from expectations of increased liquidity. Typically, falling inflation and de-escalating trade tensions strengthen the US dollar and equities, yet the greenback slipped to a seven-week low. This indicates declining confidence in the Federal Reserve’s ability to manage economic risks and a shift away from the dollar toward other fiat currencies.

Liquidity Expectations and Fed Rate Risks

The dovish inflation data offers some relief, but concerns linger about the economic outlook. JPMorgan CEO Jamie Dimon warned about vulnerabilities in the private credit market, particularly if inflation stays high and employment begins to weaken. He cautioned that the US could face a recession under such conditions.