Insights 
VT 
US April core CPI matched expectations at +2.8% year-over-year, resulting in a decline for the US dollar. The market saw a modest initial reaction, but the decline in the dollar became more pronounced as the day progressed. Global developments included the US reducing tariffs on China, a move confirmed by Chinese authorities, and further economic sanctions imposed by the US on Iran.
In other news, Trump urged the Federal Reserve to cut rates, while the New York Fed reported a significant increase in student loan delinquencies in the first quarter. The European Central Bank’s (ECB) Knot noted uncertainty’s negative impact on inflation and growth. Goldman Sachs now speculates the ECB’s terminal rate could reach 1.75% by July.
Commodity Markets Strength
Commodity markets showed strength with WTI crude oil rising to $63.68 and gold climbing by $15 to $3248. Stock markets also saw gains, with a 0.8% increase in the S&P 500, while US 10-year yields rose to 4.48%. In foreign exchange, the Australian dollar led gains, while the US dollar lagged, influenced by evolving Fed rate cut expectations and changes in investor sentiment.
The published consumer price index data for April, specifically the core measure which excludes food and energy, came in right on forecast at a 2.8% annual pace. No surprises there, and under typical conditions, such figures wouldn’t rattle markets this much. But the downward shift in the US dollar highlighted how expectations had quietly crept higher among traders in recent weeks. So when the figures failed to beat, the dollar softened — and not just briefly. As hours passed, markets leaned into the idea that the Federal Reserve may, in fact, resume thinking about rate cuts sooner than they’d previously let on.
In the background, Washington’s decision to scale back tariffs on Chinese imports was met with confirmation from Beijing – a rare moment of bilateral calm. The timing of the announcement matters. It came amid an otherwise complicated mix of pressure on Iran, as the White House rolled out fresh rounds of sanctions, largely focused on financial transactions tied to the petroleum sector. These measures shift capital flows and tend to raise the geopolitical risk premium in oil and gold – especially on volatile trading desks.
Former president Trump has once again taken to the media to critique the Federal Reserve, pushing for lower rates. Regardless of political motivations, this public pressure introduces yet another variable for markets to digest. Meanwhile, over in Manhattan, data from the New York Fed is pointing to rising stress in the financial system – notably with sharp growth in student loan delinquencies. These delinquencies undermine assumptions about household balance sheets, which had been recovering steadily since the pandemic. This is data with potential long-term implications, particularly for bond and credit markets.
European Central Bank and Commodities
Back in Europe, Knot of the ECB weighed in, making it clear that persistent uncertainty is holding back both inflation and broader economic activity. We’ve seen forecasts from Goldman Sachs reflect this concern, with their projections now putting the ECB’s highest policy rate at 1.75% by midsummer. That’s a clear shift from earlier projections and deserves close attention as it intersects with income strategies in the euro market.
On the commodity front, oil and gold moved upward, reflecting both the regional tension and a broader appetite for tangible assets in uncertain times. With WTI crude pressing beyond $63 and gold jumping another $15 to $3,248, the energy and metals space is acting as a barometer for financial anxiety. Broadly speaking, we tend to see these moves when traders look for safer ground, though some bids are clearly pure momentum.
Equities followed suit with a measured push higher – the S&P tracking up almost a full percent. Risk was being embraced, and that’s important, especially as US 10-year Treasury yields crept up to 4.48%. Higher yields typically weigh on equity pricing, but this week’s market tone suggests a broader reassessment of macro conditions, particularly around disinflation trends and future rate paths.
In FX, dynamics were more telling than in previous sessions. The Australian dollar was the day’s outperformer while the greenback trailed behind. This rotation is a product of clear shifts in interest rate differentials. With the Fed’s next moves now in question, and inflation showing less persistence than feared, traders are recalibrating carry strategies – rotating away from the dollar in favour of currencies supported by relatively upbeat domestic data or better policy clarity.
For those positioned in derivative markets, few signals came without context. Pricing discrepancies need to be watched closely in coming sessions. What appears stable may not remain so, especially as implied volatility metrics begin to diverge across asset classes. Reaction times could shorten. It’s essential now to concentrate not just on the obvious indicators, but those smaller signals driving reopening themes, balance sheet shifts, or pricing anomalies in the rates curve. The window for low-delta rebalancing seems narrow – something to take seriously as the calendar moves towards quarter-end.
