Slides as US CPI Misses Forecasts – GBP/USD and EUR/USD

Market Overview
The US Dollar Index (DXY) is trading near 98.6, stabilizing after a volatile session driven by softer-than-expected inflation data. The greenback initially weakened as traders reassessed the Federal Reserve’s policy path, before finding support as broader risk sentiment remained cautious.

Treasury yields eased modestly, reflecting growing confidence that inflation pressures are cooling faster than previously assumed.

Yesterday’s Events Reset the Narrative
Thursday’s data flow was decisive for dollar positioning. US CPI eased to 2.7% year-on-year, undershooting the 3.1% forecast and coming in below the 3.0% prior reading. Core inflation also cooled to 2.6%, reinforcing the disinflation trend.

Labor market signals were mixed but broadly stable, with initial jobless claims at 224K, unchanged from expectations and lower than the prior 237K, suggesting no abrupt deterioration in employment conditions.

However, the Philadelphia Fed Manufacturing Index collapsed to -10.2, a sharp miss versus the 2.5 forecast, reviving concerns about regional manufacturing momentum. Together, the data reduced near-term dollar upside by strengthening expectations that policy will remain restrictive but increasingly flexible later in the cycle.

Today’s Events: What Markets Are Watching
Friday’s focus shifts to demand and confidence indicators. Existing home sales are forecast at 4.15 mn, slightly above the 4.10 mn prior, offering insight into housing resilience under tight financial conditions.

Meanwhile, revised University of Michigan consumer sentiment is expected to tick up to 53.5 from 53.3, a modest improvement that could temper downside pressure on the dollar if confirmed.

Overall, the dollar’s direction hinges on whether today’s data validates yesterday’s softer macro signal or restores confidence in US growth momentum.