The US Dollar Index (DXY) rose towards 98.50, its highest since late April, after US Producer Price Index data beat forecasts. Headline PPI rose 1.4% month-on-month in April versus 0.5% expected, while core PPI increased 1.0%.
EUR/USD fell towards 1.1710 and GBP/USD dropped towards 1.3520 as the dollar strengthened and US yields rose. USD/JPY moved up to around 156.90, while AUD/USD retreated towards 0.7250.
Commodities And Key Data Ahead
WTI crude traded near $101.20 per barrel after US crude inventories fell by 4.3 million barrels. Gold traded near $4,690 as higher yields and a firmer dollar weighed on demand.
Data due on Thursday, 14 May includes AU May consumer inflation expectations, UK March GDP month-on-month, UK Q1 GDP (qoq and yoy, prelim), UK March industrial and manufacturing production, DE April HICP yoy, US initial jobless claims, and US April retail sales (headline, control group, and ex autos). NZ April Business NZ PMI is also scheduled, followed on Friday by FR April CPI (EU norm yoy and yoy), the US NY Empire State index, and US April industrial production.
WTI is a US crude benchmark priced via Cushing. Prices react to supply and demand, OPEC quotas, the US dollar, and inventory reports from API and EIA, which align within 1% about 75% of the time.
Looking back at the hot Producer Price Index print from May 2025, we saw how quickly inflation fears could boost the dollar. Today, the situation is different, yet the theme is the same; the April 2026 CPI report showed inflation is still stubborn at 3.1%. This reinforces our view that the Federal Reserve will hold rates firm, so we are watching for opportunities to buy the US Dollar on any dips.
A year ago, the Euro was already struggling against the dollar, falling toward 1.1710. We see a similar pattern now, with EUR/USD trading much lower around 1.0750 as the European Central Bank signals potential rate cuts before the Fed. Traders should consider using any rallies toward 1.0800 as selling opportunities, as the interest rate difference is likely to widen.
Fx And Rates Trade Views
In 2025, we noted that UK political concerns and Gilt volatility were weighing on the Pound. Those concerns have not disappeared, and recent UK GDP figures for Q1 2026 showed a sluggish 0.2% growth, confirming a weak economic outlook. Therefore, we anticipate continued pressure on GBP/USD, making put options an attractive strategy to hedge against a potential drop below the 1.2450 support level.
The widening yield gap drove USD/JPY toward 156.90 this time last year, a theme that has only intensified. With the US 10-year Treasury yield holding near 4.5% while the Japanese 10-year is below 1.0%, the fundamental case for a strong dollar remains intact. We believe call options on USD/JPY are a viable strategy, but traders must remain cautious of potential intervention from the Bank of Japan.
Back in May 2025, falling inventories and Mideast tensions pushed WTI crude above $101 per barrel. While geopolitical risks remain, this week’s EIA report showed a surprise inventory build of 2.5 million barrels, which has capped oil’s recent rally around $85. This suggests a range-bound market, so we are looking at selling call spreads with a strike price above $88 to capitalize on weakening demand signals.
A year ago, a stronger dollar and rising yields were pressuring gold, even with geopolitical uncertainty providing some support. We are seeing the same forces at play today, with gold struggling to overcome the $2,350 level despite ongoing global tensions. Given the high cost of holding a non-yielding asset like gold when interest rates are elevated, traders should be cautious about long positions.
