The June CPI report dramatically lowered expectations of a rate hike, with odds falling from 43% to just 13%. Markets are now looking ahead to the September FOMC meeting for clearer direction.

Bitcoin climbed to about $64,800 on Wednesday, recording its strongest session in weeks after U.S. inflation came in softer than expected. The data prompted traders to unwind bets on a Federal Reserve rate increase this month.

Headline inflation eased from 4.2% to 3.5%, while core inflation—excluding food and energy—slipped from 2.9% to 2.6%. The decline in core prices signals broader disinflation, undercutting the main case for further tightening.

Following the release, rate hike expectations dropped sharply, and the two-year Treasury yield declined by six basis points.

Bitcoin rose 3.6% over the past 24 hours and is up 3.3% for the week, with trading volumes around $31 billion. Ether led the rally, climbing to nearly $1,880—up 5.3% on the day and 7.1% over the week. Other tokens also posted gains: HYPE advanced 6.4% to $67, XRP rose 3.7% to $1.10, Solana gained 3.6% to $78, Dogecoin added 2.9%, and BNB increased 1.9% to $579.

Higher interest rates typically pressure bitcoin and other risk assets, as rising yields on cash and government bonds offer more attractive, low-risk returns compared to volatile, non-yielding assets like crypto.

In contrast, cooling inflation reduces the urgency for further rate hikes, easing that pressure and allowing funds to flow back into riskier assets.

In commodities, Brent crude rose 1% to above $85 per barrel, extending gains for a third straight day. Oil has surged 11% over two sessions amid renewed geopolitical tensions, including U.S. threats of further strikes on Iran and a resumed blockade of Iranian shipping through the Strait of Hormuz.

Equity markets followed the same trend. MSCI’s Asia Pacific index jumped 2.3%, its biggest gain in a month, led by tech stocks. South Korea’s Kospi surged 8.2%, reclaiming its position as the best-performing major index this year, while SK Hynix rose 13% in Seoul after its U.S.-listed shares jumped 27%.

Jeff Ko, chief analyst at CoinEx, said bitcoin continues to trade as a rate-sensitive risk asset rather than a macro hedge. He added that while the latest inflation data reduces near-term downside risks, it does not yet point to a sustained breakout.

With core inflation still above the Federal Reserve’s 2% target, the data gives policymakers room to pause rather than cut rates. Ko highlighted the September FOMC meeting as the next key macro event, alongside movements in the U.S. dollar and whether bitcoin ETF inflows remain strong.