U.S. April CPI Eases and U.S.-China Trade Truce Boosts Crypto Confidence

U.S. CPI Data Signals Cooling Inflation

The U.S. Bureau of Labor Statistics reported that the CPI for April 2025 rose by 0.2% month-over-month, with annual headline inflation declining to 2.3% from 2.4% in March, below market expectations of 2.4%. Core CPI, excluding volatile food and energy prices, held steady at 2.8% year-over-year, marking its lowest level in recent years.

The softer than expected CPI data has strengthened expectations for a dovish Federal Reserve policy. The Fed maintained its federal funds rate at 4.25%–4.50% in May, with analysts suggesting a potential rate cut as early as June 2025 if inflation continues to moderate. A looser monetary policy typically supports risk assets like cryptocurrencies by enhancing liquidity and investor risk appetite, as reflected in rising crypto trading volumes.

U.S.-China Trade Tensions Ease with Tariff Pause

Concurrently, the U.S. and China announced a 90-day pause on reciprocal tariffs, effective May 14, 2025, signaling a temporary de-escalation in their trade dispute. The agreement reduces U.S. tariffs on Chinese goods from 145% to 30% and Chinese tariffs on U.S. goods from 125% to 10%. The truce has alleviated concerns about a broader trade war, which had previously dampened global economic growth forecasts.

Global risk appetite improved, the S&P 500 surged 1.8%, closing at its highest level since March 3, while the Nasdaq Composite gained 2.0%, driven by tech stocks. In Asia, Hong Kong-listed shares jumped 3.0%, signaling optimism about renewed trade flows.

Combined Impact on the Cryptocurrency Market

The combination of cooling U.S. inflation and easing U.S.-China trade tensions has created a supportive environment for cryptocurrencies. Bitcoin, trading at approximately $100,000, remains resilient, with X platform traders speculating a potential rally to $120,000 if bullish momentum persists. The lower CPI reading weakened the U.S. dollar, with the Bloomberg Dollar Spot Index falling 0.3% on May 13, 2025, enhancing cryptocurrencies’ appeal to global investors.

Risks persist, however. Persistent shelter cost inflation could delay Fed rate cuts, limiting crypto market gains. The temporary tariff pause and ongoing duties on Chinese goods also introduce uncertainty, macro uncertainties continue to weigh on crypto sentiment. Despite these challenges, the near-term outlook for cryptocurrencies remains cautiously optimistic.

Looking ahead, the Federal Reserve’s June 2025 meeting will be critical, as markets anticipate a potential rate cut that could further boost crypto prices by increasing liquidity, though a decision to hold rates steady may spark volatility. Similarly, the outcome of the 90-day U.S.-China tariff pause, set to conclude in August 2025, will shape global risk appetite, with a permanent resolution likely to sustain crypto market momentum and renewed tensions potentially dampening sentiment. Investors are advised to closely monitor these developments as they navigate the evolving cryptocurrency landscape.