The University of Michigan’s 5-year US consumer inflation expectation increased from 4.4% to 4.6% in May. This rise in inflation expectations supported the US Dollar, despite weaker indices.

The EUR/USD saw a decline to three-day lows around 1.1130, as the euro faced pressure against a stronger USD. Supporting this was the rise in US consumer inflation expectations.

Forex Market Movements

In the forex market, GBP/USD dipped to 1.3250 as USD-buying resumed. The US Dollar’s strength comes amid increased consumer inflation expectations stemming from the recent U-Mich data.

Gold’s value fell below $3,200 on Friday, reversing gains from the previous day. The decrease was influenced by a stronger US Dollar and reduced geopolitical tension, leading to reduced demand for gold.

Ethereum’s value continued its upward trend, standing above $2,500 after nearly doubling since early April. The recent ETH Pectra upgrade has generated over 11,000 EIP-7702 authorizations, reflecting strong acceptance among wallets and dApps.

Donald Trump’s upcoming May 2025 Middle East visit is poised to create substantial business deals. The deals focus on enhancing US trade relationships and boosting leadership in defence and technology exports.

Market Recalibration

These recent shifts reflect a market recalibration that places growing weight on inflation expectations over immediate economic data. The University of Michigan’s upward revision of 5-year consumer inflation expectations—from 4.4% to 4.6%—sent a clear message: inflation isn’t retreating quickly. And even though stock indices failed to impress simultaneously, the US Dollar scaled higher, drawing strength from the prospect of persistent price pressures.

When the dollar gains like this, it doesn’t do so quietly. We could see that clearly as the EUR/USD skidded to three-day lows around 1.1130. What’s hammering the euro is not some fresh weakness out of the eurozone. Instead, it’s the mere fact that traders now assume the Federal Reserve may hold rates higher for longer. That assumption tilts demand away from the euro and strengthens demand for USD assets. Likewise, sterling isn’t sheltered either—GBP/USD softened to 1.3250, revealing how quickly previous optimism over UK data gets overshadowed once the greenback attracts new flows. The dollar, in this case, isn’t climbing on strength from employment or consumption—it’s climbing because inflation reluctance implies tightened conditions may not ease soon.

Gold’s retreat below the $3,200 level is another moment to unpack. When the dollar climbs while worries about global conflicts subside, traditional hedges like gold quickly fall out of favour. Traders pulled back from bullion, not because of rumbles in macroeconomic performance, but due more to reduced urgency for safer assets and rising opportunity costs of holding non-interest yielding assets like precious metals.

Meanwhile, Ethereum’s advance past $2,500 bucks this broader retracement narrative. The rise, nearly doubling since early April, is being carried by more than general risk appetite. The recent upgrade associated with EIP-7702 has already been widely adopted, with over 11,000 authorisations recorded from wallets and decentralised applications. That sort of traction speaks not to speculative froth but increasing integration, which could attract even more capital if technical indicators keep moving in tandem.

While geopolitical heat has cooled somewhat in recent days, it may not stay quiet for long. The anticipation around former President Trump’s 2025 Middle East visit is already being discussed in boardrooms—especially among firms with vested interests in aerospace, defence, and security contracts. The emphasis on bilateral trade and technology cooperation stands to create tailwinds for certain sectors, even if broader policy details are still being finalised.

So, how to move forward? Watch interest rate expectations more closely than calendar data drops alone. Pressure across FX, commodities, and digital assets is reacting faster to changing inflation sentiment than it did earlier in the year. In derivatives, be prepared for wider swings tied not just to data outcomes, but to what those figures imply for central bank patience. Shorter-term setups might outperform medium-duration positioning if rate outlooks diverge between major economies. Keep an eye not only on inflation reads but also on forward-looking measures embedded in consumer surveys—we’ve seen how even these softer indicators can spark currency realignments.

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