The U.S. dollar index (DXY) rose by 0.45% in response to concerns surrounding the U.S.-Iran ceasefire, with President Trump declaring it on “life support.” Additionally, a 3% surge in crude oil prices increased inflation expectations, prompting speculation that the Federal Reserve may tighten monetary policy. The U.S. April Consumer Price Index (CPI) rose 3.8% year-over-year, surpassing expectations of 3.7% and marking the fastest growth in nearly three years.
In Europe, the euro fell by 0.43% as the stronger dollar overshadowed recent positive economic data. The German May ZEW survey unexpectedly improved, showing a 7-point increase to -10.2, compared to expectations of a decline to -19.5. ECB Governing Council member Christodoulos Patsalides indicated that worsening inflation risks could lead to a rate hike in June, with swaps showing an 86% chance of a 25 basis point increase.
In Japan, the yen decreased by 0.27% on the back of weaker-than-expected household spending, which declined 2.9% year-over-year compared to an expected drop of 1.3%. The March leading index rose to 114.5, the highest in nearly four years. Markets are pricing in a 77% chance of a 25 basis point rate hike from the Bank of Japan at its next meeting on June 16.
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