The US Dollar Index (DXY) advanced towards the 98.50 mark, reaching its highest level since late April. This rise followed the release of US Producer Price Index (PPI) data, which significantly exceeded expectations. April’s headline PPI increased by 1.4% month-over-month, surpassing the 0.5% forecast, while Core PPI climbed 1.0%. These figures exacerbated concerns about surging inflation and suggested the Federal Reserve might maintain elevated interest rates for an extended period.
Against this backdrop, the EUR/USD pair declined towards the 1.1710 area, pressured by broad US Dollar strength and rising US yields. The Euro struggled to gain momentum as traders reassessed Federal Reserve policy expectations and observed softer signals from the Eurozone.
Similarly, GBP/USD retreated towards the 1.3520 region, weighed down by the stronger Greenback and renewed UK political and fiscal concerns. Sterling remained vulnerable amidst pressure on Prime Minister Keir Starmer, elevated Gilt volatility, and doubts surrounding the UK’s economic outlook, prompting investor caution.
Conversely, USD/JPY advanced near the 156.90 zone, supported by higher US yields following the hot inflation data. The Japanese Yen continued to face pressure as widening yield differentials persistently favored the US Dollar, despite lingering safe-haven demand linked to geopolitical uncertainty.
The AUD/USD pair pulled back towards the 0.7250 region, as the robust US Dollar offset support from commodity prices and risk-sensitive capital flows. West Texas Intermediate (WTI) Oil, meanwhile, traded near $101.20 per barrel. Its price found support in falling US crude inventories, which decreased by a more-than-expected 4.3 million barrels, alongside persistent supply concerns related to the Iran conflict and potential disruptions in the Strait of Hormuz.
Gold prices remained under pressure near the $4,690 level. The metal’s appeal was diminished by rising US yields and a stronger US Dollar, which reduced demand for the non-yielding asset. Nevertheless, persistent geopolitical uncertainty offered some floor, limiting a deeper decline.
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