The US Dollar (USD) extended its bullish momentum against major currencies, including the Swiss Franc (CHF), following the release of April's US Consumer Price Index (CPI) data, which showed a year-on-year increase of 3.8%. This figure surpassed the market consensus of 3.7% and marked the highest reading since May 2023. The core CPI, excluding food and energy, also rose to 2.8%, above the expected 2.7% and the Federal Reserve's 2% target, reinforcing inflationary pressures in the US economy [1][2][4].
The hotter-than-expected inflation data led to a repricing of Federal Reserve (Fed) rate expectations, with futures markets shifting towards a more hawkish stance and diminishing hopes for further rate cuts in the near term [1][4]. As a result, US Treasury yields climbed, with the benchmark 10-year yield rising above 4.46%, its highest level since late March [2]. The US Dollar Index (DXY) gained about 0.4% on the day, trading around 98.40–98.50 during the European session, and technical analysis indicated a potential bullish reversal as the index tested the upper boundary of its descending channel [2][3][4].
Market reactions were notable: Wall Street's main indexes registered large losses on Tuesday, reflecting a risk-off sentiment amid geopolitical tensions in the Middle East and the closure of the Strait of Hormuz, which kept oil prices near $100 and further curbed investors' appetite for risk [1][2]. The USD was the strongest against the Japanese Yen and New Zealand Dollar, while the Swiss Franc held below 0.7800 against the USD [1][2][3]. Gold (XAU/USD) fluctuated widely but closed with small losses, stabilizing above $4,700 [2].
Looking ahead, market participants are focused on the upcoming US Producer Price Index (PPI) data and the highly anticipated summit between US President Donald Trump and Chinese President Xi Jinping, where issues such as the Middle East conflict, US-China trade, and Taiwan are on the agenda [1][2]. Analysts from OCBC noted that while the USD remains supported by hawkish Fed repricing and elevated oil prices, further upside may require additional data surprises or a deeper deterioration in risk sentiment. Technical resistance for DXY is seen at 98.70 and 99.00, with support at 98.10 and 97.50/60 [4].
CONCLUSION
Stronger-than-expected US inflation data has fueled a rally in the US Dollar and US Treasury yields, as markets price out near-term Fed rate cuts and brace for further hawkishness. Risk-off sentiment prevails amid geopolitical tensions, with investors closely watching upcoming PPI data and the Trump-Xi summit for further market direction.