Behind today's advance were this morning's larger than expected decline in the producer price index (PPI) for December combined with a bigger than forecast drop in December retail sales.
The PPI fell 0.5% in December, bringing the year-over-year rate down to 6.2% versus 7.3% previously. Market expectations had been for just 0.1% dip in December and a year-over-pace of 6.8%. The core PPI for December fell 0.1%, in line with forecasts, but the year-over-year rate fell to 5.5% versus expectations for 5.7%.
December retail sales fell 1.1% versus forecasts for just a 0.8% decline. Combined with a drop of 1% in November, this marks the first back-to-back 1%+ declines in monthly retail sales since the pandemic panic.
A check of traditional markets finds the 10-year U.S. Treasury yield down a whopping 16 basis points to 3.39%, its lowest since mid-September, and well below the current Fed Funds rate target of 4.25%-4.5%. This sort of "inversion" has typically been an excellent forecaster of a recession, or at least a sizable economic slowdown. Should that come to pass, it would surely mean easier monetary policy than currently forecast, a possible boon to risk assets, including bitcoin.
Trading in the low-$21,000 area in early November 2022, bitcoin had plunged nearly all the way down to $15,000 later that month in wake of the FTX bankruptcy. The crypto then remained stuck close to $16,500 for several weeks before embarking on this current rally in early 2023.
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