The US Dollar Index (DXY) rose towards 98.30 on Tuesday after US inflation data came in hotter than expected. Headline CPI was 3.8% year on year in April versus about 3.7% expected, and CPI rose 0.6% month on month, while Core CPI increased 0.4% month on month and 2.8% year on year.
US Treasury yields moved higher, with the 10-year up 1.10% to 4.46% and the 30-year up 0.80% to 5.03%. EUR/USD slipped towards 1.1740 and GBP/USD fell near 1.3540, while USD/JPY climbed towards 157.60 and AUD/USD dropped towards 0.7240.
WTI traded above $102.00 per barrel amid tensions linked to Iran and the Strait of Hormuz. Gold eased towards $4,700 as a stronger dollar and higher yields weighed on prices.
Data due includes, on Wednesday May 13: AU Q1 Wage Price Index, NZ Q2 RBNZ inflation expectations, FR April CPI (EU norm), EU Q1 employment and GDP (prelim), EU March industrial production, and US April PPI and core PPI. Thursday May 14 brings AU inflation expectations, UK GDP and production figures, DE April HICP, US jobless claims and retail sales, and NZ April PMI; Friday May 15 includes FR CPI, the US NY Empire State index, and US industrial production.
We are now seeing a persistent inflation theme, one year after the May 2025 CPI surprise of 3.8% pushed the Dollar Index higher. The most recent data for April 2026 shows headline inflation has cooled to 3.4%, but with Core CPI ticking up to 2.9%, the Federal Reserve’s “higher for longer” stance remains justified. Traders should consider that while the initial shock has passed, volatility around inflation data releases will continue to drive short-term options pricing on the dollar.
Following the inflation data in 2025, the 10-year Treasury yield climbed to 4.46%, a move we’re still feeling the effects of today. Currently, the 10-year sits around 4.35%, indicating the market is pricing in a slightly less aggressive Fed, but the high baseline for yields remains. This environment suggests that trading interest rate futures requires a strategy that balances a potential slow decline in yields with the risk of sharp upward spikes on any hawkish Fed commentary.
We saw EUR/USD drop toward 1.1740 last year as the dollar surged, and today it trades modestly higher near 1.1850 as ECB policy expectations have firmed up. Similarly, GBP/USD has recovered from its 1.3540 low to around 1.3620, especially after recent Q1 2026 GDP figures showed the UK economy avoided a recession, easing the fiscal concerns we saw in 2025. Derivative plays on these pairs should now factor in less dollar dominance and more sensitivity to local European and UK economic data releases.
The climb of USD/JPY toward 157.60 in May 2025 was a warning sign that we see has fully materialized, with the pair now testing the 160.00 level. Intervention fears from Japanese authorities are now more intense than they were a year ago, creating a tense trading environment. Traders should be buying puts for downside protection or using option collars to hedge against sudden, sharp yen appreciation caused by official action.
A year ago, WTI crude was trading above $102 per barrel, fueled by geopolitical fears in the Strait of Hormuz. We have since seen prices cool to the $88 region, as those specific tensions have eased and concerns over a global economic slowdown have weighed on demand. The latest EIA report confirmed this trend, showing a surprise inventory build of 2.5 million barrels, suggesting call option premiums on crude oil may be overpriced right now.
Gold’s slip to the $4,700 area in 2025 demonstrated its sensitivity to a surging dollar and rising Treasury yields. Today, with gold trading near $4,850, we can see how it has benefited from yields pulling back slightly from their peaks and persistent safe-haven demand. This suggests gold futures could remain supported as long as underlying geopolitical risks and central bank buying continue to offset the pressure from relatively high interest rates.
