US Dollar Strengthens
The US dollar index initially weakened, but then rebounded and traded above 98.4 on Tuesday, as the CPI report did little to change market expectations regarding the Fed's next policy move. Headline inflation rose in line with expectations, both on an annual and monthly basis, while core inflation was lower than expected, suggesting price pressures, particularly those stemming from recently imposed tariffs, remain limited for now.
Following the data, traders slightly increased their expectations for an interest rate cut, but the market still expects two federal funds rate cuts by the end of the year, with the first likely in September. Fed Chairman Jerome Powell warned that inflation may rise this summer due to the impact of tariffs, suggesting that a rate cut could be delayed. Looking ahead, PPI and retail sales figures due later this week will provide additional insight into the health of the US economy. The US dollar mostly strengthened against the yen and the euro.
Source: Trading Economic
