US inflation may return to 4%, and the US dollar index will maintain strong fluctuations.
2026-06-10 15:22:07
On Wednesday, the global foreign exchange market's focus was on the US May Consumer Price Index (CPI) data, with investors hoping to glean insights into whether rising energy prices are reigniting inflation and whether the Federal Reserve will need to maintain a more hawkish stance in future monetary policy. Prior to the data release, the US dollar index remained high, fluctuating around 100.00, indicating continued strong demand for safe-haven assets in the dollar.
Chen Lede, a foreign exchange analyst at MUFG, stated that if US inflation data for May exceeds market expectations, it will further reinforce the market's assessment that US interest rates will remain high for an extended period, thus providing broader upward momentum for the US dollar. Chen Lede pointed out that the conflict between the US and Iran shows no signs of a rapid resolution in the short term, and with persistent geopolitical risks, strong inflation data will further solidify the dollar's advantage.
The market expects the US overall consumer price index (CPI) year-on-year to rise above 4.0% in May from 3.8% in April, with rising energy prices being a significant factor driving the inflation rebound. The ongoing conflict in the Middle East has kept international oil prices high, increasing transportation and production costs, which may gradually be passed on to consumers. If inflation data shows renewed price pressures, market bets on further interest rate hikes by the Federal Reserve may continue to intensify, pushing up US Treasury yields and the US dollar index further.
Besides inflation, geopolitical risks have also been a significant support for the recent performance of the US dollar. Diplomatic negotiations between the US and Iran have yet to achieve a substantial breakthrough, and the market remains wary of further deterioration in the regional situation. As the Strait of Hormuz is a crucial global energy transport route, the current sluggish shipping activity has exacerbated market concerns about continued disruptions to global energy supplies.
Amid declining risk appetite, global stock markets faced some pressure, leading to capital flows into traditional safe-haven assets such as the US dollar, which helped maintain the resilience of the dollar index. Although the market generally believes that tensions in the Middle East may ease in the future, the specific timing remains uncertain. Therefore, safe-haven demand is expected to continue to support the dollar in the short term.
From the perspective of the Federal Reserve's policy, the recent strong performance of the US job market provides the Fed with room to maintain a restrictive policy stance. Previously released US non-farm payroll data exceeded market expectations, indicating that the labor market remains robust. Given the resilient economic growth and the risk of renewed inflation, the Fed lacks a reason to quickly shift to an easing policy in the short term, further strengthening the fundamental advantage of the US dollar.
From a technical perspective, the daily chart of the US dollar index shows that the price has formed significant support near the 100.00 level and maintained its rebound. If US CPI data is stronger than market expectations, the dollar index is expected to further challenge the resistance zone of 100.80 to 101.20, and a break above this level could open up room for further gains. If inflation data is lower than expected, the dollar index may fall back to test the support zone around 99.50 and 99.00. Daily momentum indicators suggest that the market is biased towards bullishness in the short term, but further confirmation from fundamental news is needed to maintain upward momentum.
From a 4-hour chart perspective, the US dollar index is currently in a slightly bullish consolidation phase, with short-term moving averages gradually trending upwards, indicating that buyers still hold the upper hand. If tensions in the Middle East continue and US inflation data reinforces hawkish expectations from the Federal Reserve, the dollar index may maintain its strength and continue to rise. Conversely, if geopolitical risks ease or inflationary pressures are lower than market expectations, some safe-haven funds may flow out of the dollar, leading to a period of adjustment in the index.
Editor's Summary : The main drivers of the current US dollar index are US inflation expectations, the Federal Reserve's policy path, and geopolitical risks in the Middle East. If the US May CPI data continues to rise, it will further strengthen market expectations that the Federal Reserve will maintain high interest rates for an extended period, providing sustained support for the dollar. Meanwhile, tensions between the US and Iran, as well as uncertainties surrounding shipping in the Strait of Hormuz, have also enhanced the dollar's safe-haven appeal. In the short term, the performance of the 100 level and the US CPI data will be crucial indicators for determining the next direction of the US dollar index.
Chen Lede, a foreign exchange analyst at MUFG, stated that if US inflation data for May exceeds market expectations, it will further reinforce the market's assessment that US interest rates will remain high for an extended period, thus providing broader upward momentum for the US dollar. Chen Lede pointed out that the conflict between the US and Iran shows no signs of a rapid resolution in the short term, and with persistent geopolitical risks, strong inflation data will further solidify the dollar's advantage.
The market expects the US overall consumer price index (CPI) year-on-year to rise above 4.0% in May from 3.8% in April, with rising energy prices being a significant factor driving the inflation rebound. The ongoing conflict in the Middle East has kept international oil prices high, increasing transportation and production costs, which may gradually be passed on to consumers. If inflation data shows renewed price pressures, market bets on further interest rate hikes by the Federal Reserve may continue to intensify, pushing up US Treasury yields and the US dollar index further.
Besides inflation, geopolitical risks have also been a significant support for the recent performance of the US dollar. Diplomatic negotiations between the US and Iran have yet to achieve a substantial breakthrough, and the market remains wary of further deterioration in the regional situation. As the Strait of Hormuz is a crucial global energy transport route, the current sluggish shipping activity has exacerbated market concerns about continued disruptions to global energy supplies.
Amid declining risk appetite, global stock markets faced some pressure, leading to capital flows into traditional safe-haven assets such as the US dollar, which helped maintain the resilience of the dollar index. Although the market generally believes that tensions in the Middle East may ease in the future, the specific timing remains uncertain. Therefore, safe-haven demand is expected to continue to support the dollar in the short term.
From the perspective of the Federal Reserve's policy, the recent strong performance of the US job market provides the Fed with room to maintain a restrictive policy stance. Previously released US non-farm payroll data exceeded market expectations, indicating that the labor market remains robust. Given the resilient economic growth and the risk of renewed inflation, the Fed lacks a reason to quickly shift to an easing policy in the short term, further strengthening the fundamental advantage of the US dollar.
From a technical perspective, the daily chart of the US dollar index shows that the price has formed significant support near the 100.00 level and maintained its rebound. If US CPI data is stronger than market expectations, the dollar index is expected to further challenge the resistance zone of 100.80 to 101.20, and a break above this level could open up room for further gains. If inflation data is lower than expected, the dollar index may fall back to test the support zone around 99.50 and 99.00. Daily momentum indicators suggest that the market is biased towards bullishness in the short term, but further confirmation from fundamental news is needed to maintain upward momentum.
From a 4-hour chart perspective, the US dollar index is currently in a slightly bullish consolidation phase, with short-term moving averages gradually trending upwards, indicating that buyers still hold the upper hand. If tensions in the Middle East continue and US inflation data reinforces hawkish expectations from the Federal Reserve, the dollar index may maintain its strength and continue to rise. Conversely, if geopolitical risks ease or inflationary pressures are lower than market expectations, some safe-haven funds may flow out of the dollar, leading to a period of adjustment in the index.
Editor's Summary : The main drivers of the current US dollar index are US inflation expectations, the Federal Reserve's policy path, and geopolitical risks in the Middle East. If the US May CPI data continues to rise, it will further strengthen market expectations that the Federal Reserve will maintain high interest rates for an extended period, providing sustained support for the dollar. Meanwhile, tensions between the US and Iran, as well as uncertainties surrounding shipping in the Strait of Hormuz, have also enhanced the dollar's safe-haven appeal. In the short term, the performance of the 100 level and the US CPI data will be crucial indicators for determining the next direction of the US dollar index.
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