US Dollar Index: CPI and geopolitics underpin strength – MUFG

MUFG’s Lloyd Chan highlights that a potentially hotter US CPI print could reinforce expectations of higher-for-longer US interest rates, underpinning broad US Dollar strength. Safe-haven demand linked to unresolved US–Iran tensions is seen keeping DXY near 100.00, as risk sentiment weakens and global equities come under renewed pressure.

Hot CPI and tensions support dollar

"A key focus today is the upcoming US CPI print, where inflation could rise above 4.0%yoy in May vs. 3.8%yoy in April. A hot inflation print would reinforce “higher-for-longer” US rate expectations, supporting broad USD strength, particularly with the US–Iran conflict showing no signs of a swift resolution."

"Middle East tensions remain front and centre, weighing on global risk sentiment. US equities have come under renewed pressure, while safe-haven demand continues to anchor DXY near the 100.00 level. While our base case still assumes eventual geopolitical de-escalation, the timing remains highly uncertain."

"Diplomatic efforts between the US and Iran have yet to deliver meaningful progress. At the same time, shipping activity through the Strait of Hormuz remains subdued, reinforcing concerns over sustained disruptions to global energy flows."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)