ING’s Chris Turner notes the Dollar has started the week slightly stronger as hopes for a Middle East ceasefire fade and Oil prices jump. He highlights US April Consumer Price Index (CPI) as the key release, with expectations for higher headline and core inflation. Turner sees the Federal Reserve (Fed) staying cautious and US Dollar Index (DXY) likely confined to a 98.00-98.50 range.

Dollar supported by stagflationary backdrop

"Barring some intense behind-the-scenes pressure from China to secure a deal, the market will continue to price an impasse, higher oil prices and a wave of global inflation."

"Headline inflation is expected to rise to 3.7% year-on-year (3.3%) while the core rate should rise to 2.7% (2.6%)."

"Given that the full force of the stagflationary shock has yet to hit, we struggle to see the dollar selling off in a sustained fashion just yet."

"That probably means that DXY can bounce around in a 98.00-98.50 range for a while longer, while USD/JPY can creep back to 158 even though US Treasury Secretary Scott Bessent is in Japan early this week and will probably deliver supportive words to Japan's FX intervention campaign."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)