📉 EURUSD down 0.3% ahead of April’s inflation

The April US CPI inflation reading is scheduled for release later today (13:30). The consensus is for a significant increase in the headline figure (to around 3.7%, the highest level since September 2023) and a modest rise in the core one (to 2.7%). 

Markets will focus primarily on the latter, which excludes the most volatile components – food and energy – providing a more reliable picture of deep-rooted price pressures. An increase in this measure could make the FOMC more inclined to tighten monetary policy. At present, the market is pricing in an approximately 30% probability of an interest rate hike before the end of the year – should the core measure come in significantly above the consensus, we can expect a hawkish repricing, and consequently a stronger dollar.

Figure 1: Market-implied FOMC interest rate projection (2026 - 2027)

Source: Bloomberg, 12/05/2026

It should be borne in mind, however, that the average consumer perceives inflationary pressure not in core terms but in nominal terms, with a disproportionately large emphasis on fuel and food prices. A rise in the headline measure above the expected level (3.7%) should therefore also serve as a bullish signal for the dollar. Although this in itself should not constitute an argument for raising interest rates, as it is by nature largely regarded as temporary, it may contribute to a rise in inflation expectations, which will certainly be very important for the Committee. This could, in turn, lead to higher wage growth and consumption in the future, creating the so-called second-round effects.

Figure 2: US CPI and PCE inflation (2000 - 2026)

Source: XTB Research, 12/05/2026

Last month, most of the increase in the index on a monthly basis was driven by airfares, which rose sharply due to significantly higher fuel prices – these account for 20–30% of operating costs and over half of variable costs. Memory cards and CPUs should also be on the agenda, as their production costs have risen significantly due to the ongoing conflict between the US and Iran. Furthermore, due to methodological adjustments, we should see a notable increase in rental costs, which have been consistently underestimated in recent months due to disruptions resulting from the longest government shutdown in history. A modest rise in core inflation (around 0.3% MoM) is therefore already priced in by the markets and should not cause any major concern. 

Figure 3: Key contributions to MoM US CPI Inflation change (2023 - 2026)

Source: XTB Research, 12/05/2026

The dollar is strengthening ahead of the release – though it is difficult to attribute this to the speculation surrounding April’s inflation figures. The US currency is supported by a risk-off sentiment stemming from the deadlock in negotiations between the US and Iran. We are seeing a renewed rise in energy commodity prices and hawkish repricing of interest rates in the major economies. This environment favours safe-haven currencies and the currencies of net energy exporters – with the dollar falling into both of these categories.

Figure 4: EUR/USD (04/05 - 12/05)

Source: xStation, 12/05/2026