Forexlive Americas FX news wrap: US dollar sellers return after lower CPI

• US April core CPI +2.8% vs +2.8% y/y expected
• Trump: The market will go higher
• More Trump: Working hard to end Russia/Ukraine bloodshed
• China confirms US tariff reduction, highlights further future cuts
• Trump tells Powell to cut rates: “Let it all happen, it will be a beautiful thing”
• US Treasury launches another round of Iran sanctions
• NY Fed: Student loans saw ‘large uptick’ in deliquency in Q1
• Francois-Philippe Champagne to remain Canadian finance minister
• ECB’s Knot: Uncertainty a negative for both inflation and growth in short run
• Goldman Sachs now expects the ECB to reach terminal rate at 1.75% in July

Markets:

• WTI crude oil up $1.73 to $63.68
• Gold up $15 to $3248
• US 10-year yields up 2.8 bps to 4.48%
• S&P 500 up 0.8%
• AUD leads, USD lags

There was a shift in the FX market after the US CPI report. The details were a tad on the cool side and overall CPI fell to the lowest since 2021. The moves were modest at first but steadily snowballed, adding up to a solid decline in the dollar across the board.

The shift in Fed pricing was more modest with the market continuing to price in a 40% chance of a cut in July and a near-certainty of a cut in September but all of those probabilities have been steadily sliding over the past three weeks.

I suspect that strong inflows to equities have been part of the reason for the recent strength in the dollar and that may be starting to ebb, though there were good buyers on ES futures dip ahead of the open and nice gains on the day (once again).

In short, the momentum trade largely continued in stocks and oil but there were some cracks elsewhere as gold bounced and the dollar sagged. In fixed income, yields are nearing the Trump-admin high and that should start to get some attention in the days ahead, particularly as the focus shifts to the tax cut bill in Congress.

This article was written by Adam Button at www.forexlive.com.