Dollar holds its ground as CPI takes centre stage

The Dollar is digging in. DXY is consolidating just below the 100 handle this morning after last week’s sharp recovery, and today’s May CPI report is the next big test of whether that recovery has legs.

Markets are pricing headline inflation back above 4.0% YoY — the first time since May 2023 — with core CPI expected at 0.3% MoM and 2.9% YoY. If those numbers land, the Fed hike in December narrative stays intact and the dollar stays bid. Simple as that.

The one wrinkle: core CPI has a softer-than-expected reading baked in as a tail risk. Shelter makes up roughly 45% of the core basket, and rent pressures are easing. A 0.2% MoM print instead of 0.3% could see DXY slip back toward 99.50/60 — but that would likely be a dip, not a reversal. A hot PPI tomorrow and next week’s FOMC should keep buyers interested on any pullback.

Beyond CPI, equity markets are choppy as investors shuffle portfolios ahead of Friday’s SpaceX IPO. Oracle reports after the close tonight — a useful temperature check on the AI data centre trade at a tricky moment for tech. And with $99 billion flowing into USD money market funds last week — the highest of 2026 — the institutional bid for dollar safety is hard to ignore.

DXY – Technical view

DXY has rallied hard off the mid-May lows near 97.80, recovering back above the 100 handle before pulling back slightly to 99.85 this morning. The key resistance zone overhead sits at 100.40–100.60 — the underside of the prior April range, marked clearly on the chart. That is the level bulls need to clear to confirm this recovery as a genuine trend reversal.

A soft CPI surprise would likely drag price back to 99.50/60 first. Below that, 99.00–99.20 is the line in the sand. The direction of travel points higher — but today’s data is the gatekeeper.