DXY Flat, US Inflation and Iran Risks Support Dollar
The US Dollar Index (DXY) held steady around 98.30 during the Asian session on Wednesday (May 13), after strengthening for two consecutive days. This relatively flat movement occurred amid a combination of hawkish sentiment from US inflation data and increasing geopolitical volatility.
The dollar received support after US President Donald Trump again issued harsh statements regarding Iran. Trump claimed Iran was "under control," but issued an ultimatum that there were only two outcomes: a new deal or "annihilation."
From Iran's side, Deputy Foreign Minister Kazem Gharibabadi emphasized that any peace deal must include reparations, recognition of sovereignty over the Strait of Hormuz, and a complete end to US sanctions. This tug-of-war maintains high regional uncertainty, which often keeps markets on the defensive.
On the data front, a hotter-than-expected US inflation report reinforced the view that the Federal Reserve is likely to keep interest rates high for longer. The US Bureau of Labor Statistics reported that the April CPI rose 0.6% month-on-month and 3.8% year-on-year, the highest since May 2023, while the core CPI rose 2.8% year-on-year.
With inflationary pressures still lingering, the window for interest rate cuts this year is considered increasingly narrow. The market is now even pricing in a quarter-point increase in December, signaling a shift in policy expectations.
The focus next shifts to the upcoming release of producer price inflation (PPI) data, which is considered crucial for understanding the extent to which the war in Iran and rising energy costs have trickled down to producer prices. This data could influence the dollar's movements through changes in interest rate expectations and the direction of US yields. (asd)
Source: Newsmaker.id
