The US dollar index (DXY00) is down by 0.13% following the release of May consumer prices, which rose 4.2% year-over-year, matching expectations. This increase marks the fastest pace in three years, while core CPI also rose by 2.9% year-over-year, the fastest in seven months. Both figures potentially ease inflation fears and may influence the Federal Reserve’s monetary policy decisions during its next meeting on June 16-17.
Amid escalating US-Iran tensions, where both nations exchanged strikes, the dollar is supported by safe-haven demand. Oil prices have surged 1%, further complicating inflation expectations. Additionally, Japan’s May Producer Price Index rose by 0.9% month-over-month and 6.3% year-over-year, surpassing predictions and suggesting an increased likelihood of a 25 basis point rate hike by the Bank of Japan at its upcoming meeting, with a 99% probability being priced in.
While the euro is benefiting from dollar weakness, as reflected in a 0.12% rise against the dollar, higher oil prices pose risks to the Eurozone’s economy. The European Central Bank is also expected to raise rates by 25 basis points on Thursday, reflected in a 100% market expectation for that move.
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