US Inflation Data Bolsters Dollar and Rate Hike Expectations

A hotter-than-expected U.S. Consumer Price Index (CPI) report bolstered the U.S. Dollar and drove Treasury yields higher, strengthening expectations that the Federal Reserve may maintain elevated interest rates for an extended period. The strong inflation data led to a broad-based dollar rally, with the British Pound, Australian Dollar, and New Zealand Dollar weakening while the USD/JPY pair advanced. However, some analysts suggest that the core Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, may show a softer reading.

Precious Metals Show Resilience Amid Headwinds

Gold prices edged higher, showing resilience despite the headwinds from a stronger U.S. dollar and the latest inflation data, as market focus also included geopolitical factors. Meanwhile, silver prices stabilized on Tuesday after recording a significant advance of over 7% in the prior session.

Global Economic and Trade Developments Diverge

Central banks and economies outside the U.S. showed diverging trends, with an ECB official noting that rate hikes are becoming more likely, while Taiwan's central bank is also expected to pursue a mild tightening path. In contrast, European Union exports to the United States are contracting at a notable rate, and the European aluminium industry faces rising cost risks from carbon policy reforms. Elsewhere, WTI crude oil prices rallied on geopolitical news concerning Iran.