The USD has rallied in the past 24hrs following a higher-than-expected US inflation figure and rising geopolitical tensions in the Middle East.

Data out yesterday afternoon showed that US inflation (CPI) rose 3.5% in March (from the previous year) which was up from February’s 3.2% increase and higher than market expectations for 3.4%. This created a large swing in the probabilities of the Federal Reserve keeping interest rates on hold in June from a 40% chance before the data release to odds of over 80% afterwards. This has made the USD more attractive to investors seeking higher yields which has led to a flurry of dollar buying in the past 24hrs.

As a result, the GBP/USD has fallen nearly 1.2% in the past day and now trades towards the lower end of where it’s been in the past 4-months. The EUR/USD has lost around 1.2% since the US inflation data and trades close to a 2-month low (and not far off its 5mth lows). The GBP/EUR remains contained within the familiar ranges we’ve seen this year (circa 1-cent range this year). Next up we have the European Central Bank interest rate meeting this afternoon followed by US producer price data. Then tomorrow afternoon we have the US consumer sentiment numbers.

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