EURUSD,H1

US May CPI rose 0.1% on the headline and core. There were no revisions to April’s respective gains of 0.3% and 0.1%. The key core figure was a tick lighter than expectations. The April gains left the 12-month growth rate slowing to 1.8% y/y overall, versus 2.0% y/y, and the core at 2.0% y/y from 2.1% y/y. All of the monthly changes were small. Energy prices dipped 0.6% from 2.9% and breaks a string three straight months of gains. Transportation costs slid 0.3% from the prior 1.2% gain. Services prices were up 0.1% from 0.3%, and housing costs also were up 0.1% from 0.3%. Food/beverage prices rose 0.3% from -0.1%. Apparel was unchanged from -0.8% and -1.9% in March. Real average hourly earnings rose 0.2% from -0.1%, leaving the y/y clip at 1.3% from 1.2% previously. Meanwhile, it may take several months before we see the impact of the May 10 increase in tariffs to 25% from 10%. The tame CPI report should support Treasuries and sustain expectations for a Fed easing sooner rather than later.

The Greenback slipped following the CPI outcome, which saw the core reading a tick cooler than expected. EURUSD rallied to NY session highs of 1.1340 from under 1.1325, as USDJPY fell to 108.30 from near 108.45. Equity futures pared losses some, but remain modestly underwater, while yields headed lower. The CME FedWatch tool shows expectations at over 80% for a rate cut in July, with expectations for next week’s meeting rising to 19%.

EURSUD

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