FX.co ★ Dollar Holds Gains After Hot CPI Report

The dollar index held above 98 on Wednesday after gains in the previous session, supported by stronger-than-expected US inflation data that tempered expectations for Federal Reserve interest rate cuts. US consumer prices rose 3.8% in April, topping forecasts of 3.7% and marking the highest reading since May 2023, as surging energy costs linked to the Middle East conflict intensified inflationary pressures. Markets have now largely priced out any Fed rate cuts for this year, while the implied probability of a quarter-point rate hike in December has risen to 35%. Investors are turning their attention to the latest producer price data for further clues on how the war involving Iran is affecting the US economy. At the same time, oil prices remained elevated as diplomatic efforts to resolve the US–Iran standoff showed little progress, sustaining upside risks to inflation. President Donald Trump is also expected to meet Chinese President Xi Jinping this week, though he has signaled that trade negotiations will take priority over the Iran issue.