• US CPI for May unchanged at 0% MoM, below estimates of 0.1%, with annual increase at 3.3%.
  • 10-year Treasury bond yield drops 14 basis points to 4.266%, lowest since April.
  • Gold hits weekly high of $2,341; traders anticipate potential 25 bps rate cut by September with 61.3% odds.

US Treasury yields collapsed on Wednesday after a colder-than-expected May US Consumer Price Index (CPI) report increased speculation about the Federal Reserve's rate cuts in 2024. Despite that, caution is warranted, as the Federal Open Market Committee (FOMC) will reveal its monetary policy decision at around 18:00 GMT.

Colder-than-expected inflation report drives speculation of rate cuts ahead of FOMC policy decision

The US Bureau of Labor Statistics (BLS) revealed that the CPI was unchanged at 0% MoM, below estimates of 0.1% and April’s 0.3% increase. In the twelve months to May, it rose by 3.3%, below April’s and the 3.4% consensus.

Underlying inflation figures decreased from 0.3% to 0.2% MoM, while on an annual basis, hit 3.4%, lower than expectations of 3.5% and April’s 3.6%.

The US 10-year Treasury bond yield plummeted 14 basis points to 4.266%, its lowest level since April, after beginning the session at 4.426%. This pushed Gold prices toward a weekly high of $2,341 before stabilizing at around $2,324.

Data from the Chicago Board of Trade (CBOT) shows that traders expect 39 basis points (bps) of easing, according to December’s 2024 fed funds rate futures contract. In the meantime, the CME FedWatch Tool shows odds for a 25 bps rate cut in September jumped from 46.8% a day ago to 61.3%.

US inflation data came ahead of the Federal Reserve’s monetary policy decision. The Fed is expected to keep rates unchanged while updating its economic projections. Traders would be looking for hints about the future interest rate path.

Inflation FAQs

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Trading Pro
Read review
Pepperstone
Read review
Trading Pro
Read review
Pepperstone
Read review
Trading Pro
Read review
Pepperstone
Read review
XM
Read review
Moneta Markets
Read review
XM
Read review
Moneta Markets
Read review

Recommended content


Recommended content

Editors’ Picks

AUD/USD drifts lower toward 0.6300; looks to US NFP for fresh impetus

AUD/USD drifts lower toward 0.6300; looks to US NFP for fresh impetus

AUD/USD heads toward 0.6300 early Friday, resuming the pullback from near 0.6400. The pair remains on a slippery slope despite a weaker US Dollar. US-China trade tensions and increased odds of Trump's tariffs-led global recession undermine the risk-sensitive Aussie. All eyes on US NFP and Powell. 

AUD/USD News
USD/JPY holds recovery near 146.00; upside seems limited ahead of US NFP

USD/JPY holds recovery near 146.00; upside seems limited ahead of US NFP

USD/JPY trades close to 146.00, holding its recovery in the Asian session on Friday. Investors dial down bets of aggressive BoJ rate hikes, amid worries that Trump's new tariffs could negatively impact Japan's economy, helps the pair sustain its latest upswing. But buyers remain wary ahead of US NFP and Powell. 

USD/JPY News
Gold: Will Powell and Payrolls drive the next leg higher?

Gold: Will Powell and Payrolls drive the next leg higher?

Gold price is taking a breather early Friday after witnessing a volatile trading day on Thursday. Traders are consolidating the weekly gains, slightly away from the record high of $3,168, bracing for the US Nonfarm Payrolls report and US Federal Reserve Chair Jerome Powell’s speech for a fresh directional impetus.  

Gold News
What to expect from Bitcoin and XRP following Trump tariffs: Experts weigh in

What to expect from Bitcoin and XRP following Trump tariffs: Experts weigh in

Bitcoin stretched its decline on Thursday, briefly dropping below $83,000 as President Trump's newly announced reciprocal tariffs extended the crypto market downturn by over 4%. The sustained decline and high volatility highlight Bitcoin's increasing risk to macroeconomic uncertainties. 

Read more
Trump’s “Liberation Day” tariffs on the way

Trump’s “Liberation Day” tariffs on the way

United States (US) President Donald Trump’s self-styled “Liberation Day” has finally arrived. After four straight failures to kick off Donald Trump’s “day one” tariffs that were supposed to be implemented when President Trump assumed office 72 days ago, Trump’s team is slated to finally unveil a sweeping, lopsided package of “reciprocal” tariffs. 

Read more
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

Forex MAJORS

Cryptocurrencies

Signatures

Best Brokers of 2025