Dollar Steady, US CPI Unwavering Market Direction
The US dollar erased losses that emerged after the US core inflation data for May came in slightly lower than expected. The Bloomberg Dollar Spot Index moved nearly flat, after previously falling as much as 0.3% to a daily low when the CPI data was released.
US headline inflation rose 0.5% month-on-month, in line with market expectations. Meanwhile, core CPI rose 0.2% month-on-month, lower than the 0.3% forecast. This data provided some relief as core inflation pressures were not as strong as feared, but it was not enough to change the view that inflation remains above the Fed's target.
Treasury yields actually rose after the data, with the 10-year US yield increasing by about 2 basis points to 4.54%. The increase in yields helped the dollar pare its losses. Fundamentally, when US yields rise, the dollar's appeal is also bolstered because dollar-based assets offer relatively higher yields.
Market focus also remains on the Middle East. US President Donald Trump has again promised new strikes against Iran after accusing Tehran of stalling the peace negotiations. The risk of this conflict maintained demand for safe-haven assets, including the dollar, even though the core CPI data gave the market some room to calm down.
In Canada, USD/CAD briefly fell nearly 0.4% to 1.3899 after the Bank of Canada kept interest rates at 2.25% for the fifth consecutive year. However, the Canadian dollar later pared gains after the BoC warned of a policy dilemma due to the risk of inflationary pressures from the Middle East conflict.
Meanwhile, USD/JPY rose 0.1% to 160.53, remaining in a sensitive area that keeps the risk of Japanese intervention alive. EUR/USD was stable at 1.1544, while GBP/USD was virtually unchanged at 1.3374. The G-10 economy remains generally tight as the market awaits a combination of signals from the US CPI, the ECB decision, the direction of yields, and developments in the US-Iran conflict. (Arl)*
Source: Newsmaker.id
