Insights 
VT 
Inflation in the US, as per the Consumer Price Index (CPI), decreased to 2.3% annually in April, down from 2.4% in March, missing the expected 2.4% target. The core CPI, excluding food and energy, remained steady with a 2.8% rise annually and a 0.2% increase monthly.
The US Dollar Index declined by 0.25% to 101.53. Analysis of the US Dollar’s performance versus major currencies shows that the US Dollar was strongest against the Japanese Yen, increasing by 0.66% this week.
April Cpi Predictions
Predictions for April’s CPI suggested a 2.4% annual increase, with core CPI expected to hold at 2.8% year-over-year. Analysts noted super core inflation, core services minus housing, declined to 2.9% from 3.8% the previous month.
The Federal Reserve recently maintained rates between 4.25% and 4.50%, with a cautious outlook. Trade talks between the US and China resulted in a temporary reduction of tariffs, raising optimism and supporting the US Dollar’s recovery.
Despite mixed expectations, fluctuations in the CPI could affect Fed policy and prompt movements in currency pairs such as EUR/USD. Technical analysis shows potential support and resistance for EUR/USD at different SMA levels.
Impact On Fx Movement
This latest inflation data highlights a subtle but ongoing shift in the monetary narrative, with April seeing the annual headline CPI edge lower to 2.3%, a fraction beneath forecasts. That modest drop from 2.4% in March might not seem dramatic at first glance, but the implications are unmistakable for those tracking policy signals. The core CPI figure, on the other hand, held its ground at 2.8% year-on-year, with the month-on-month increase at 0.2%, reinforcing the idea that underlying price pressures remain persistent in key areas of the economy.
We should also recognise the market’s reaction translated almost immediately into FX movement. The DXY, which tracks the dollar against a basket of currencies, slipped 0.25% to 101.53. That fade appeared to follow the softer inflation print and accompanying recalibration in rate expectations. Interestingly, the dollar’s single firm outlier this week was against the Japanese yen, with a solid 0.66% gain. One interpretation might be that the Bank of Japan’s ultra-loose stance continues to create space for a relative divergence in policy, even as Fed expectations soften slightly.
The detail within the inflation report provides more depth than the headline numbers alone. The so-called “super core” inflation metric – essentially core services minus housing – dropped sharply from 3.8% to 2.9%. While not a primary indicator for the public, this measure is often watched closely by monetary authorities. It provides a cleaner signal of service-sector inflation minus the noise of shelter cost adjustments. From our standpoint, this slide supports the argument for a more cautious approach to future rate hikes – or even potential pauses – without resorting to speculative conclusions.
We have seen that the central bank chose to hold interest rates steady between 4.25% and 4.50%, which wasn’t unexpected. However, the tone around that decision reflected a degree of wariness. Policymakers aren’t rushing to declare disinflation complete, even with numbers shifting in the desired direction. That sentiment, in part, has kept short-term yields in check, applying pressure to the dollar and supporting risk-sensitive currency pairs.
Layered on top of this, recent trade discussions between Washington and Beijing led to a reduction in certain tariffs. That de-escalation resulted in a bounce for the dollar earlier in the week, though the broader macro picture quickly resumed control. These types of trade developments can often deliver short-lived relief for markets, although movement in derivative pricing usually waits for firmer, more durable structural changes.
EUR/USD, for example, remains sensitive to both data and broader rate narratives. Technical analysis points to support near the 100-day and 200-day simple moving averages, with potential resistance above prior consolidation levels. That type of structure – hovering around commonly-watched averages – can create tighter trading conditions in the short term, but it also increases the potential for wider moves should breakout levels be breached.
From our view, action should be measured. The miss in CPI might shift sentiment near-term, but the core remains sticky. That stickiness is what markets are increasingly focused on. Trading strategies that rely solely on top-line inflation prints may overlook the importance of those more detailed disaggregated figures. Watching where super core data trends over the coming releases will likely add more value than purely following headline inflation. Any movement in services ex-housing could lead to repositioning in both rates and FX markets.
Lastly, while the dollar index continues to retrace, we must be cautious not to overinterpret a single week’s decline. Direction will depend more heavily on upcoming data, particularly PCE inflation, employment reports, and consumer spending momentum. Until then, volatility across G10 FX and rate-sensitive futures contracts remains reactive, not predictive.
