The U.S. dollar index, which measures the greenback against six major currencies, was steady at 98.325, hovering near its strongest level in a week.
Inflation Shock Pushes Yields Higher, Fed Cut Bets Fade
Recent data showing U.S. consumer prices rising 3.8% year-on-year in April—the sharpest increase since May 2023—has reshaped market expectations around monetary policy.
The reading, partly driven by energy pressures linked to geopolitical tensions, has strengthened the view that the Federal Reserve may keep rates elevated for longer.
U.S. Treasury yields climbed accordingly, with the two-year note at 3.9896% and the 10-year at 4.4629%, both near seven-week highs.
Market pricing has largely removed expectations of a rate cut this year, while bets on a potential rate hike later in the year have increased, reflecting growing uncertainty over inflation’s trajectory.
Global Currencies Under Pressure as Risk Sentiment Weakens
Major currencies slipped against the dollar as risk appetite softened.
The euro traded at $1.1735, while sterling stood at $1.3533, both slightly weaker. The Australian dollar fell to $0.72335 and the New Zealand dollar declined to $0.5939.
According to Ray Attrill of National Australia Bank, markets are reacting to a combination of higher yields and weaker equities.
“I think it's a less positive risk tone, effectively,” he said, adding that rising yields following the CPI release have helped “put a floor under the dollar for the time being.”
Oil Prices Stay Elevated Amid Middle East Tensions
Energy markets remained on edge, with Brent crude holding near $107 a barrel as geopolitical uncertainty continues to support prices.
Concerns intensified after remarks from U.S. President Donald Trump suggesting that ceasefire efforts between the U.S. and Iran were “on life support,” following Tehran’s rejection of a proposed deal.
The ongoing tensions have added another layer of inflation risk to global markets, further complicating the outlook for central banks.
Yen Volatility and Yuan Strength Draw Attention
The Japanese yen traded near 157.715 per dollar after sharp fluctuations raised speculation of possible government intervention. U.S. officials also reiterated that excessive currency volatility is undesirable, a statement seen as backing Tokyo’s stance.
Meanwhile, China’s yuan held near 6.79 per dollar, its strongest level since early 2023, reflecting relative stability in Asian currency markets despite broader dollar strength.