FX Daily: US price check this week in Daily Currencies Ratings 11/05/2026 USD: Little progress in Middle East, focus on inflation The week starts with the dollar a little stronger across the board. Last week’s optimism that a Middle East peace deal could be reached ahead of President Trump’s visit to China (scheduled to start this Thursday) has been dashed. The President branded Iran’s latest offer as ‘totally unacceptable’. Barring some intense behind-the-scenes pressure from China to secure a deal, the market will continue to price an impasse, higher oil prices and a wave of global inflation. We could hear more about the drawdown in global oil supplies and a ‘tipping point’ about to be reached when the IEA releases its monthly Oil Market Report (OMR) this Wednesday. The fallout of the Middle East energy shock continues to reverberate around the global economy and the highlight of the data calendar this week will be tomorrow’s release of US CPI for April. Headline inflation is expected to rise to 3.7% year-on-year (3.3%) while the core rate should rise to 2.7% (2.6%). With the US labour market so far holding up and the unemployment rate staying low, the Federal Reserve is going to have to sound cautious. Indeed, money markets have flipped back to considering Fed hikes towards the end of this year. From the Fed side, we will hear from two of the three hawkish dissenters at the April FOMC meeting, Neel Kashkari and Beth Hammack. Additional US data this week comes in the form of PPI data on Wednesday and April Retail Sales on Thursday – with the latter expected to have held up well again as the stock market hits new highs. Given that the full force of the stagflationary shock has yet to hit, we struggle to see the dollar selling off in a sustained fashion just yet. That probably means that DXY can bounce around in a 98.00-98.50 range for a while longer, while USD/JPY can creep back to 158 even though US Treasury Secretary Scott Bessent is in Japan early this week and will probably deliver supportive words to Japan’s FX intervention campaign. Chris Turner EUR: More consolidation EUR/USD has been holding up quite well, largely on the back of the recent pro-risk, softer dollar environment. Here, strong AI stories in Asia (Korea and Taiwan), plus USD/CNY trading through 6.80 have really been the dominant drivers and provided support to the emerging currencies around the world. The outlook for the euro has been less encouraging, however, where the activity data has been poor, and it is only the prospect of European Central Bank hikes this summer that is preventing EUR/USD from dropping back to 1.15. With oil prices staying high, expect the ECB to continue to talk tough and speeches by Christine Lagarde and Philip Lane this Wednesday may firm up the view that the ECB will hike 25bp on 11 June. That is currently priced with an 82% probability. Unless there is a breakthrough on a peace deal this week, we struggle to see EUR/USD breaking above 1.18 and see greater risk of sub 1.1700 driven by higher US prices and more hawkish Fed pricing. Chris Turner GBP: PM Starmer tries to save himself Sterling is softening a little as markets digest the fall-out from local UK elections held late last week. While Labour losses were not quite as bad as feared, they have failed to quell speculation over a Labour leadership contest and a clear leftward drift in government policy. Manchester Mayor Andy Burnham remains waiting in the wings and the markets will react