US CPI Misses Again — Is California Quietly Seceding? Is the Dollar Losing Its Safe-Haven Status?

TradingKey - The U.S. released its latest CPI data yesterday. According to the Bureau of Labor Statistics, the U.S. Consumer Price Index (CPI) for May came in below expectations. Headline CPI rose just 0.1% month-over-month, down from April’s 0.2% and below the expected 0.2%. Core CPI, which excludes food and energy prices, increased by only 0.13% in May, down from 0.24% in April and also missing forecasts of 0.3%.

The so-called “Calexit” movement—referring to California potentially seceding from the U.S.—has once again drawn public attention due to rising tensions between the state and the federal government. Supporters argue that California's economic strength makes it capable of functioning as an independent nation. However, the U.S. Constitution does not allow states to unilaterally secede, presenting a major legal barrier. Moreover, independence would require the creation of new sovereign institutions and extensive renegotiations with the federal government on issues ranging from defense to trade—making practical implementation extremely difficult.

Nonetheless, the movement reflects deep political and cultural divisions between California and much of the rest of the country, with some residents seeking a fundamental redefinition of the state’s relationship with Washington.

Amid weaker-than-expected inflation data and growing domestic political fragmentation, the U.S. dollar has continued to weaken. Following the CPI release, the dollar index fell below the 99 level and was trading at 98.3 at the time of writing.

【DXY Intraday Chart, Source: Investing】

Has the Dollar Lost Its Safe-Haven Status?

Deutsche Bank has pointed out that over the past decade, the U.S. dollar played a significant role as a safe-haven asset in investment portfolios. Historically, the dollar tended to strengthen during times of crisis, making unhedged U.S. risk assets an effective diversification tool. However, this trend is now showing signs of change.

【Source: Deutsche Bank, Bloomberg】

A prior report from UBS had already sounded the alarm. It pointed out that the long-standing concept of “American exceptionalism”—a core pillar underpinning the dollar’s global dominance—is now facing serious challenges.

With CPI continuing to soften and political divisions intensifying, the U.S. dollar’s status as a reliable safe-haven asset is increasingly being called into question. While talk of California seeking independence remains largely symbolic, it highlights deepening societal fractures within the United States. Ultimately, the dollar’s dominant role in the global financial system is now facing unprecedented pressure.