The dollar index extended gains amid safe-haven demand and stronger-than-expected US inflation data.
The latter reinforced expectations that the Federal Reserve will maintain a cautious stance over monetary policy.
The latest consumer price figures showed inflation accelerating to its fastest annual pace since mid-2023, reflecting the growing impact of elevated energy costs linked to the ongoing US-Iran tensions.
The subsequent inflation concerns could continue to support Treasury yields across the curve. The 10-year note remained near multi-month highs, as investors increasingly price the possibility that the Federal Reserve may keep interest rates unchanged for longer. At the same time, expectations could tilt toward a more restrictive outlook if price pressures continue to broaden.
Attention now shifts to today’s producer price data, which could offer further evidence of how the energy shock is feeding through the economy. Investors will also monitor geopolitical developments and the meeting between the US and Chinese heads of state, both of which could inject additional volatility into currency and bond markets.
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