The US Dollar Index breaks through the 99 mark, and after the CPI data is released, market sentiment changes. Can cryptocurrencies rebound?

The US Dollar Index rose slightly by 0.19% on January 15, closing at 99.323, hitting a recent high. This upward momentum is not an isolated event but a direct reflection of market sentiment adjustments following the release of December CPI data. Against the backdrop of the Federal Reserve’s independence controversy and changing policy expectations, the strengthening dollar is reshaping the global asset allocation landscape, while the crypto market faces new pressures and opportunities.

Technical and Fundamental Aspects of the USD Index Breaking Through 99

Detailed Observation of Exchange Rate Changes

As of the New York market close, the performance of the dollar against major currencies shows clear divergence:

Data indicates a comprehensive appreciation of the dollar, especially against the euro and pound, reflecting a market re-pricing of dollar assets.

Policy Expectation Shift Post-CPI Data

December CPI data was released on January 13, showing an overall YoY increase of 2.7%, in line with market expectations. While this seemingly “perfect landing” data, in reality, has altered market perceptions of the Fed’s rate cut path through 2026:

• Inflation remains sticky, still above the Fed’s 2% target
• Market expectations for the FOMC meeting at the end of January to hold rates steady have further strengthened (rising from 95% to an even higher level)
• Expectations of “2-3 rate cuts” have begun to narrow, with some institutions even adjusting their full-year rate cut forecasts

This suggests that the high-interest-rate environment may persist longer, boosting the attractiveness of the dollar as a high-yield currency and driving the USD Index higher.

Market Impact of the Federal Reserve Independence Controversy

Dual Effects of Political Risks on USD Credibility

Related news shows that Fed Chair Powell is under criminal investigation by the Department of Justice over headquarters renovations, prompting strong support from global central banks and economists. This event has produced seemingly contradictory market reactions:

In the short term: doubts about the Fed’s independence pressure the dollar’s credibility, causing a slight dip in the USD Index, while gold hits a historic high (above $4600), and safe-haven assets like Bitcoin and silver strengthen.

In the latest phase: as CPI data is confirmed and policy expectations adjust, the market re-evaluates the Fed’s stance, and the dollar index actually strengthens.

This reflects two layers of market logic: first, concerns over Fed independence are temporarily suppressed by the policy implications of CPI data; second, the sustained high-interest-rate environment provides stronger support for dollar appreciation.

New Variables Facing the Crypto Market

Bitcoin’s Rebound and Dilemma Coexist

According to recent reports, Bitcoin experienced its best single-day performance in weeks on January 14, rebounding from around $91,000 to $96,800, with nearly 5% gain in 24 hours. The main drivers include:

• CPI in line with expectations, increasing rate cut expectations (though limited)
• Safe-haven sentiment triggered by the Fed independence controversy
• Technical bullish squeeze (four-hour bullish streak, Bollinger Bands upper band support)

However, the current dilemma is also evident: a strengthening dollar means lower costs for holding USD, reducing the appeal of buying Bitcoin with dollars. In other words, the goals of dollar appreciation and Bitcoin rally may conflict in the short term.

Insights from Gold’s New High

Gold hit a record high above $4600 on January 13, reflecting market sentiment towards the Fed independence controversy—safe-haven demand remains strong. But subsequent gold movements suggest that once rate cut expectations fully fade, the appeal of traditional safe assets may be replaced by high-yield USD assets.

As a high-beta risk asset, cryptocurrencies are more vulnerable to risk-off environments than gold, and are more easily suppressed by dollar appreciation.

Key Focus for Future Trends

Reaffirmation of Fed Policy Signals

The FOMC meeting at the end of January will be a critical point. If the Fed further emphasizes “maintaining high rates,” the USD Index could continue upward, breaking through 100. This would be clearly bearish for crypto assets.

Evolution of Geopolitical Risks

Recent reports indicate that market attention is also on geopolitical factors, which could become variables disrupting the current equilibrium. If geopolitical risks escalate, safe-haven funds may flow back into gold and Bitcoin, pushing down the dollar index.

Long-term Impact of the Fed Independence Dispute

Although CPI data has temporarily suppressed the market impact of this controversy, in the medium to long term, damage to the Fed’s independence could strengthen Bitcoin’s narrative as a “non-political” store of value, which is significant for crypto valuation logic.

Summary

Breaking through 99 in the USD Index reflects a market re-pricing of Fed policy expectations—narrowing rate cut expectations and prolonging the high-interest-rate environment. This exerts short-term pressure on crypto assets; while Bitcoin has rebounded to $96,800 driven by safe-haven sentiment, the logic of dollar appreciation conflicts with the upward momentum of cryptocurrencies.

Key points to watch: whether the Fed’s late-January meeting can further reinforce “maintaining high rates,” and whether geopolitical risks will reignite safe-haven demand. Until these variables are confirmed, the rebound space for crypto may be limited, and the trend of dollar strength difficult to reverse.