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Cryptocurrencies have once again fallen due to the announcements regarding additional customs tariffs, only to see a reversal of this decline shortly after, as Trump and the opposing side retreated. However, has the downturn truly reversed? No. Are recession concerns dissipating? No. The dull period continues for cryptocurrency investors as they await the upcoming U.S. inflation data.
Tariffs and Cryptocurrencies
At the moment this article was being prepared, an advisor to Trump announced that the previously revealed 50% additional tariff on steel and aluminum imposed on Canada has been postponed. Tariffs may be implemented based on a final agreement by April 2. Trump is making numerous emphatic statements to maintain a strong position.
Just hours ago, he stated that Canada will become our 51st state, and now we are imposing a 50% tariff on them. The current situation reveals the contradictions in Trump’s statements, which seem to have a significant impact on the markets while creating chaos in the risk markets.
U.S. Inflation Data
On Wednesday, March 12, the U.S. CPI data will be revealed, with reports indicating that tariffs have already started reflecting in product prices. If the data is encouraging amid concerns that policies may lead to increased inflation, it might alleviate some fears. Indeed, Trump had previously mentioned that declining egg prices would lead to lower inflation.
A 0.3% increase is expected for the February data, specifically targeting core inflation, which excludes volatile items like food and energy. Yearly core inflation is anticipated to be 3.2%, down from the previous month’s 3.5%.
The good news is that these figures reflect a steady yet slow decline in inflation rates throughout the past year. The bad news remains that they are still above the Fed’s 2% target. Morgan Stanley economist Diego Anzoategui stated the following before the inflation data:
“We expect a broad-based slowdown accompanied by weakening core goods and services. Why is it still high? There are three reasons: (1) We expect used car prices to rise due to past wildfires, (2) certain goods and services show seasonality in our analysis for February, and (3) we think that supply constraints kept airfare inflation high in February.”
Goldman Sachs economists commented:
“We are seeing more disinflation resulting from rebalancing in the automotive, rental housing, and labor markets, but we expect support from inflation in healthcare and the increase in tariff policy.”
