US Dollar Under Pressure Amid Softer Inflation
Market analysis on behalf of Erik Boekel, Chief Commercial Officer at DHF Capital
After declining during the previous session, the US Dollar could remain under pressure after headline inflation eased to 2.3% in April, below expectations of 2.4%, marking the lowest level since February 2021. The softer-than-expected reading could reinforce expectations that the Federal Reserve could adopt a more dovish stance, weighing on the greenback. However, the full impact of tariffs may still be unfolding, adding a layer of uncertainty.
On the trade front, investors continued to assess the impact of the recent US-China tariff rollback agreement for a 90-day period. This de-escalation has slightly reduced recession fears and supported sentiment, but lingering uncertainties around future negotiations could keep the greenback’s outlook clouded.
In the bond market, US longer-term yields stabilized after a rise, with the 10-year yields settling below 4.47% as traders scale back expectations of a hawkish Fed.
Looking ahead, all eyes turn to upcoming US retail sales and producer price data later this week for further insights into the health of the economy. Softer data could reinforce rate cut bets and pressure the dollar, while stronger readings may offer support.
