emre yumlu 
Bitcoin started the week with a decline, dropping below $91,000 after surpassing $95,000, driven by a rise in the US Dollar Index (DXY).
The latest US labor market data stirred movement in both Bitcoin and broader financial markets. Initially, Bitcoin saw a brief dip following the announcement but quickly recovered, briefly surpassing $95,000. However, on Monday morning, the leading cryptocurrency experienced some downward pressure, and by the afternoon, it fell below $91,000, causing concern among investors.
At the time of writing, Bitcoin was trading above $94,000 but later dropped below $91,000, sparking worries across the market. The US Dollar Index (DXY), boosted by Trump’s election, surged above the 110 mark, drawing attention and contributing to volatility in assets like Bitcoin.
Inflation and the Fed’s Rate Decisions
This week marks a crucial point for financial markets, particularly as the US headline inflation has risen from 2.3% to 2.7% in recent months. There is growing speculation about whether inflation will hit the 3% mark again.
The upcoming US inflation data, due on Wednesday, is expected to come in at around 2.9%. If inflation continues to rise, it could diminish expectations for the Federal Reserve (Fed) to cut rates in 2025. This could have a widespread negative impact on financial markets, including cryptocurrencies.
Should inflation rise as expected, it could put downward pressure on various financial assets, including Bitcoin. Notably, Bank of America, after the release of last Friday’s job market data, noted that it does not anticipate the Fed to implement rate cuts in 2025. Such a shift in policy could significantly affect the markets.
Core inflation, excluding energy and food prices, has been above 3% for an extended period, and this trend will be closely monitored. The persistence of high core inflation could influence the Fed’s strategy on controlling inflation.
The Fed’s response to these inflationary pressures will be critical in shaping both interest rates and market movements.
The next Fed meeting is scheduled for January 29, with markets expecting a 97% probability that the Fed will keep rates unchanged. However, any changes to this outlook could come depending on the upcoming inflation data.
If inflation exceeds expectations, market volatility could increase, and we may see further declines in the value of Bitcoin and other digital assets. With these critical developments, it’s shaping up to be a significant week for financial markets.
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