U.S. CPI hits a three-year low, returning to the "2" range, with mixed performance in the financial markets

The United States released the highly anticipated Consumer Price Index (CPI) last night. The report showed that the U.S. CPI rose 2.9% year-on-year in July, marking a decline for the fourth consecutive month and returning to the "2" range for the first time since March 2021. The inflation data met market expectations, which enhanced the market's anticipation of a rate cut by the Federal Reserve in September, but also reduced the likelihood of a significant cut of 50 basis points.

Following the data release, the market reacted in a series of ways. The U.S. dollar index initially fell but then rose slightly, ultimately closing up 0.01%; the British pound fell 0.25% against the dollar; the dollar rose 0.33% against the yen. As the market bets that the Federal Reserve will cut rates more than the European Central Bank this year, the euro strengthened, reaching an eight-month high. The three major U.S. stock indices opened higher but turned lower early in the session, ultimately closing slightly up, with the Dow Jones rising 0.61%, the S&P 500 up 0.38%, and the Nasdaq up 0.03%.

In the international market, oil prices fell across the board, mainly due to an unexpected increase in crude oil inventories. However, geopolitical issues remain a market focus, with a new round of ceasefire negotiations in Gaza set to take place in Doha on the 15th, which Hamas has refused to attend. As a result, U.S. oil fell 1.44%, and Brent crude fell 1.03%. The precious metals market also faced pressure, with spot gold prices briefly rising to $2,480, just under $4 away from last month's record high, but then retracing and closing down 0.72%. Silver prices also fell 1.03%.

The cryptocurrency market experienced significant volatility after the CPI data was released. Bitcoin and Ethereum briefly rose after the data was announced but then quickly fell back. Bitcoin surged to $61,839 but rapidly dropped below $60,000 due to selling pressure, currently reported at $58,440, down 4.55% in 24 hours. Ethereum followed a similar trend, peaking at $2,784 before quickly declining, currently at $2,653, down 2.55% in 24 hours.

The unusual performance of the crypto market may have multiple reasons. On one hand, the market had already anticipated a rate cut by the Federal Reserve, and the announcement did not bring new stimulus, instead triggering profit-taking behavior from some investors. Some large holders may have used this positive news to sell assets at high prices, leading to a sharp price drop. On the other hand, late last night, the U.S. government transferred 10,000 bitcoins from a Silk Road-related wallet address to Coinbase, raising concerns in the market about a potential large sell-off of Bitcoin, further dampening market sentiment.

The CPI data for July continued the trend of significant inflation decline, making a rate cut by the Federal Reserve in September almost a certainty. As for whether the cut will be 25 basis points or 50 basis points, the market still needs to observe the weekly initial jobless claims and the non-farm payroll report for August, which will be released on September 6. According to the CME FedWatch Tool, the market currently estimates a 56.5% probability of a 25 basis point cut in September and a 43.5% probability of a 50 basis point cut.

The release of this CPI data and the market reaction once again reflect the complexity and variability of the market. Although macroeconomic data and policy expectations have a significant impact on the market, factors such as investor behavior, market psychology, and external events cannot be ignored. While investors respond cautiously, they may also reduce overall risk through diversified investments. For example, rather than concentrating all funds in a single industry, one can trade foreign exchange, buy U.S. stocks/indexes, and invest in commodities like gold on a one-stop trading platform like 4E, which offers over 600 asset trading pairs and supports up to 1,000 times leverage for long and short trading. Through such diversified investments, even if some assets perform poorly, the good performance of other assets can help balance overall risk and return to some extent.