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US Inflation Data Spurs USD Rally as Traders Reassess Fed Policy Path
forex7 months before
Summary：US CPI data released on Thursday showed that inflation remained stubborn, cooling market expectations for multiple rate cuts this year. The dollar index strengthened, and the euro and pound came under pressure against the dollar, and Asian currencies also suffered setbacks. Traders are watching the upcoming FOMC meeting for more clues on policy direction.
On June 12, 2025, the U.S. Bureau of Labor Statistics released the Consumer Price Index (CPI) for May, which rose 3.5% year-on-year, higher than the expected 3.3%. The core CPI annual rate also remained at 4.1%, indicating that inflation has not yet fallen significantly. After the release of this data, the U.S. dollar index (DXY) rebounded strongly, hitting a two-week high of 104.88.
As a result, the EUR/USD exchange rate fell below the 1.07 mark, and the GBP/USD exchange rate fell back to around 1.26. At the same time, Asian currencies such as the Japanese yen and the Chinese yuan also depreciated significantly, indicating that global investors were re-adjusting their expectations for the path of US monetary policy.
The market had generally expected the Federal Reserve to start cutting interest rates in September 2025, but after the release of current inflation data, the CME FedWatch tool showed that traders expected the first rate cut to be delayed until December 2025, and only one rate cut throughout the year has become the mainstream expectation.
Analysts pointed out that strong consumer data and sticky service industry inflation are the key to stubborn inflation. If the Fed continues to send hawkish signals at the June FOMC meeting, the US dollar may be further boosted, while gold and non-US currencies may continue to be under pressure.
🧾Summary:
The CPI data reinforced the market tone of "high interest rates for longer", and the US dollar regained its strong position. In the short term, market volatility may increase, and investors need to pay close attention to the upcoming FOMC meeting and Chairman Powell's speech to determine the next trend of the US dollar.
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