Maria Agustina Patti

The US Dollar stabilized to a certain extent and traded in a range on Tuesday, holding near one-month highs after surging in the previous session. The rally followed news that the US and China reached a temporary agreement to reduce tariffs, easing recession fears.

Despite this positive development, the dollar’s advance could remain capped as traders shift their focus to today’s US inflation data. April’s Consumer Price Index (CPI) is expected to show a 2.4% year-on-year increase, matching the previous month’s figure, while core CPI is forecast to remain steady at 2.8%.

The CPI data will be closely monitored for any signs of inflationary pressure that could influence the Federal Reserve’s policy outlook, affecting both the currency and Treasury yields. A stronger-than-expected reading could bolster the dollar by dampening expectations of rate cuts. Conversely, softer readings may heighten expectations of a looser monetary policy, weighing on the greenback.

Meanwhile, the 10-year US Treasury yield hovered near 4.46%, as the trade agreement reduced demand for safe-haven assets and eased recession fears. However, uncertainty lingers as both sides are set to resume trade negotiations in the coming weeks, creating volatility risks.

Patti Financial Markets Strategist Consultant to Exness