The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, has remained subdued for the second consecutive day, hovering around 100.90 during Wednesday’s Asian session. The US Dollar weakened following softer-than-expected inflation data from the United States. Market participants are now turning their focus toward the upcoming release of the US Producer Price Index (PPI) and the University of Michigan’s Consumer Sentiment Survey, both due later this week.
According to the US Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) rose 2.3% year-over-year in April, slightly lower than March’s 2.4% and market expectations. Core CPI, which excludes volatile food and energy prices, increased by 2.8% annually, matching the previous month’s figure and forecasts. On a monthly basis, both headline and core CPI rose by 0.2%.
While the April figures marked a three-year low for annual headline inflation, analysts believe this may be the last strong CPI report for the time being, as the Trump administration’s planned triple-digit tariffs on key trade partners are expected to take effect in May.
Trade Deal Optimism Helps Limit Dollar’s Downside
Despite the soft inflation data, the downside pressure on the US Dollar Index is likely to be limited due to positive developments in US-China trade talks. Over the weekend in Switzerland, the US and China reached a preliminary agreement to substantially reduce tariffs. US tariffs on Chinese goods will fall from 145% to 30%, while China will lower tariffs on US imports from 125% to 10%. This agreement is viewed as a significant step toward easing ongoing trade tensions between the two countries.
US President Donald Trump, in a Fox News interview, expressed optimism about the US-China relationship, describing it as “excellent” and adding that he is open to direct negotiations with President Xi Jinping on a broader trade deal. These developments have helped support the US Dollar, limiting any significant decline in its value despite the weaker inflation figures.
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