Is there a mystery behind the continuous rise in the US dollar? This week, the US CPI test

On the Asian session on Monday, the US dollar index hovered above the 100 mark, and this week's economic calendar includes a number of important data releases. Japan's current account balance will be released on Monday; on Tuesday, it will pay attention to the summary of the Bank of Japan's May meeting opinions, UK employment data, Germany's May ZEW index and US April CPI inflation data; on Wednesday, Sweden's April CPI inflation rate and Canada's March building permit data; on Thursday, Australia's April employment data, UK GDP and manufacturing data, Norway and euro zone quarterly GDP data, U.S. initial unemployment claims, Philadelphia Fed Business Index, PPI index, retail sales and industrial production data, and Canadian manufacturing sales data; on Friday, Japan's first-quarter GDP data and the University of Michigan's preliminary consumer confidence index in May.

Analysis of major currencies

U.S. dollar: As of press time, the US dollar index hovered around 100.58. The US dollar performed strongly last week, and the US dollar index recorded a weekly increase, mainly due to the conclusion of the US-U.K. trade agreement and the market's optimistic expectations for the Sino-US Geneva talks. At the beginning of the week, the US dollar rose steadily against major currencies, especially against the Japanese yen and Swiss francs. However, the dollar saw a slight correction on Friday, down 0.01% against the Swiss franc to 0.83150 and 0.39% against the yen to 145.355. Technically, the middle rail of the Bollinger band 99.5934 and the upper rail of the Bollinger band form a short-term suppression. Although the MACD bar chart is still in the negative range (-0.5695), the fast and slow lines converge clearly, indicating that the long and short games are intensified.

Euro: As of press time, the euro/dollar hovered around 1.1229, and the euro zone inflation expectations rose due to the threat of Trump tariffs. The market was concerned about its potential impact on economic growth. The ECB maintained its ultra-loose monetary policy unchanged, leaving room for near-term stimulus measures. Risk aversion sentiment triggered by the Russian-Ukrainian conflict has provided some support for the euro, but it is not enough to offset the strong impact of the dollar. Technically, the overall structure is clearly inclined toward upward. The 100-day and 200-day simple moving averages are located below the current level and remain bullish, reflecting continued medium-term demand. Supporting this prospect are the 30-day index and simple moving averages, both on the upward trend and below the current price trend, providing dynamic support. In contrast, the 20-day simple moving average is slightly higher than spot, which may serve as a short-term resistance to limit the immediate gains.

GBP: As of press time, GBP/USD hovered around 1.3277, GBP fluctuated upward against the US dollar last week, and the weekly rise. After the U.S.-UK trade agreement was announced on Thursday, the GBP fell briefly, but New York rebounded 0.50% to 1.3306 on Friday. The GBP held the key support level of 1.3275, and the overall trend was affected by a mix of unexpected improvement in UK retail data and a rate cut in the Bank of England. UK retail sales data in March increased by 0.4% over expectations, and the market was originally expected to fall by 0.4%, providing support for the GBP. The Bank of England lowered interest rates, and Governor Bailey said the rise in the consumer price index may be a temporary phenomenon. UK debt management The office adjusted its fiscal 2026 government bond issuance plan to alleviate the pressure of long-term Treasury selling pressure and further support the stabilization of the pound. Technically, momentum remains bullish, as shown by the Relative Strength Index (RSI), but the price movement shows the opposite. Despite no divergence, buyers need to regain 1.3400 in order to form a higher high and have the opportunity to test the annual high of 1.3443. In further strength, the next resistance is 1.35. Conversely, if GBP/USD remains below 1.3300, the first support is 1.3250, followed by a daily low of 1.3211.

Summary of news from the foreign exchange market

1. US Secretary of avaforexcn.commerce: 10% of the benchmark tariff will continue in the foreseeable future

U.S. Secretary of avaforexcn.commerce Lutnik said on Sunday that we believe that 10% of the global benchmark tariff may be retained in the foreseeable future, but he insisted that countries and businesses, not (US) consumers, will bear the cost. He also said: "The responsibility of enterprises is to strive to sell products to American consumers, and domestically produced products do not need to pay the tariff, so foreign avaforexcn.companies will eventually have to participate in the avaforexcn.competition. "butMany consumer avaforexcn.companies have made it clear that as tariffs continue to have an impact, they may increase product prices.

2. California Governor: The current tariff policy "may cause the United States to lose its position as the world's largest economy"

California Governor Gavin Newsom recently criticized the U.S. federal government in a video posted on social media. He said that the current tariff policy of the U.S. government "may cause the United States to lose its position as the world's largest economy." In the video, he criticized the US government's tariff policy for blocking US imports and directly affecting the daily lives of ordinary people. "In a few months, people will lack school bags and Christmas toys. Tariffs will make American families worse." Newsom said that as the strongest state in the United States, California occupies an important position in the global economy, which is precisely because California is avaforexcn.committed to "reducing trade barriers and providing quality services to American consumers." However, current tariff policies are hurting all this, resulting in price increases and port stagnation.

3. The British steel industry urges the government to clarify the timetable for the United States to cancel tariffs

The British steel industry urges the government to clarify when the United States will cancel tariffs. Earlier, the United States and the United Kingdom reached a landmark agreement to remove tariffs imposed by Trump on the industry. The UK welcomed the trade deal, saying it would reduce steel tariffs from 25% to 0%, so that British producers can continue to export products to the United States. However, details released late Thursday showed that both sides also had to formally determine the safety requirements and quotas that the steel industry must avaforexcn.comply with, leaving industry representatives unclear when the tariffs will be lifted. "This is certainly not going to be formal; I mean, so far, there is obviously a lot of things in the agreement that are not avaforexcn.completely determined and defined," said Chrysa Glystra, head of trade and economic policy at the industry group UK Steel. Glystra added that businesses don’t know they have to meet supply chain conditions to take advantage of tariffs. "We really don't know when this will take effect, nor do we know the specific timetable."

4. China and the United States held high-level economic and trade talks, and made substantial progress

According to CCTV, from May 10 to 11, China and the United States held high-level economic and trade talks in Geneva, Switzerland. The Chinese delegation stated at a press conference that the two sides had in-depth exchanges on economic and trade issues of concern to each other. The atmosphere of the talks was frank, in-depth and constructive, substantial progress was made and important consensus was reached. The two sides agreed to establish a China-US economic and trade consultation mechanism, clarify the leaders of both sides, and conduct further consultations on economic and trade issues of their respective concerns. China and the United States will finalize the relevant details as soon as possible and will issue a joint statement reached at the talks on May 12. The report also said that from May 10 to 11 local time, China-US economic and trade leaders and Vice Premier He Lifeng, the leader of China-US economic and trade, and US-level leaders, US Treasury Secretary Becent and Trade Representative Greer held high-level economic and trade talks in Geneva, Switzerland. Both sides focus on implementing January 1On the 7th, the heads of China and the US dollar exchanged important consensuses and conducted frank, in-depth and constructive avaforexcn.communication, reached a series of important consensuses, and made substantial progress in the talks.

5. Forecast of this week: Economic data and trade negotiations dominate

After many central bank interest rate decisions were released last week, the focus of market attention this week will turn to economic data and details of the talks between the United States and its major trading partners. During his visit to Saudi Arabia, Qatar and the UAE from May 13 to 16, US President Trump is also expected to make a series of remarks. The U.S. will release April CPI data on Tuesday, which will affect Fed's interest rate expectations. This was followed by PPI, retail sales, weekly unemployment claims, Philadelphia Fed Index, industrial production, home starts, and the University of Michigan consumer confidence and inflation expectations on Friday. San Francisco Fed President Daly will make a speech.

The eurozone will release EU economic forecasts, second valuation of GDP in the first quarter and employment, industrial production and trade. Germany will announce the ZEW economic prosperity index and the final value of the April inflation rate. The UK's busy schedule begins with employment data on Tuesday, followed by a number of monthly data released on Thursday, including GDP, construction output, industrial production, trade, manufacturing output and corporate investment. Bank of England President Andrew Bailey will give a speech in Amsterdam, and the Bank of England will have 12 speeches this week. Japan will release current account and trade data, PPI and first-quarter GDP. The Bank of Japan will release a summary of the opinions of the meeting from April 30 to avaforexcn.com, and deliberation avaforexcn.committee member Nakamura Hiraki will deliver a speech. Australia will release employment data for April, salary price index for the first quarter, and consumer and business confidence surveys. New Zealand has no important data, but the Fed will release one-year and two-year inflation expectations. There is no important data in Canada.

Institutional View

1. Bank of America: Global investors lower their dollar exposure, partly due to concerns about fiscal conditions

Bank of America's foreign exchange and interest rate confidence survey in May showed that international investors are reducing their dollar exposure due to various concerns, including concerns about the U.S. fiscal outlook. Bank of America said selling the dollar has become "the most convincing deal since 2025" and surpasses the persuasiveness of buying government bonds. Bank of America strategists said in a report that the euro may be the biggest beneficiary of the decline in demand for the dollar.

2. BMO: The likelihood of a Bank of Canada cut interest rates in June is "significantly increasing". Doug Porter, chief economist at BMO Capital Markets, said that although election-related jobs temporarily boosted Canada's employment data in April, it is still frustrating. Porter said the net increase in 7,400 jobs this month masked some foodieShocking numbers. The most important of these is the decline in manufacturing jobs by nearly 31,000, which is similar to the decline of the industry during the pandemic and the global financial crisis between 2008 and 2009. "It doesn't take archaeological excavations to realize it's a weak report," Porter told clients, adding that average hourly wage growth has slowed to its lowest level in three years. He said the employment data “significantly increased” the likelihood of the Bank of Canada’s 25 basis points cut in June.

3. RBC: The euro's momentum is temporarily weakening, and it should rebound once the Fed cuts interest rates

RBC predicts that the euro's momentum has stalled at present, but it should rebound when the Fed starts cutting interest rates later this year, rising to 1.17 by the end of 2025 and 1.24 by the end of 2026. The euro has been falling since it hits a more than three-year high of 1.1574 on April 21. The enthusiasm for selling the dollar has waned as trade tensions eased. However, a U.S. rate cut should be beneficial to the euro, and the euro's share of global foreign exchange reserves is likely to increase in the avaforexcn.coming years.

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