On May 12th, Goldman Sachs and Bank of America became the latest major Wall Street institutions to join the "delayed rate cut forecast" camp. They argue that both employment and inflation data support the case for the Federal Reserve to keep interest rates unchanged at least until the end of this year. As geopolitical tensions in the Middle East unsettle oil markets and push inflation higher, traders are increasing bets that the Fed will maintain its current policy stance throughout 2026, with the possibility of a rate hike even in early 2027. This shift in expectations is echoed by a growing number of Fed officials, including two dissenting members from the last central bank meeting who suggested the next policy move could be a rate increase. Aditya Bhave, Head of US Economics at Bank of America, wrote on May 8th: "The data simply do not support rate cuts this year. Core inflation is too high and trending upward. The strong April jobs report was the final straw, especially considering the hawkish commentary from Fed officials." Bhave and his colleagues now expect the Fed will not cut rates again until July 2027, a significant shift from their previous forecast of a cut this September.

Separately, data from the National Association of Realtors showed that US existing home sales in April were at a seasonally adjusted annual rate of 4.02 million units, a slight increase of 0.2% from the previous month, but slightly below market expectations of 4.05 million. The March figure was revised upward to 4.01 million units. The inventory of unsold homes in April stood at 1.47 million, representing a 4.4-month supply, which is higher than the 4.2-month supply in March and the 4.3-month supply a year earlier. The national median existing-home price for April was $417,700, up 0.9% year-over-year and also higher than the $409,100 recorded in March. By category, single-family home sales were flat compared to March, while condominium and co-op sales increased by 2.7% month-over-month. Existing-home sales were unchanged compared to April of last year.

Key data to watch today includes Germany's final April CPI year-over-year rate, Germany's May ZEW Economic Sentiment Index, and the US unadjusted April CPI year-over-year rate.

**US Dollar Index** The US Dollar Index traded in a narrow range yesterday, closing slightly higher. It is currently trading around 98.10. Support came from short-covering activity and a cautious market stance ahead of the release of US inflation data. Additionally, diminishing expectations for Federal Reserve rate cuts provided further support. Today, resistance is seen near 98.50, with support around 97.50.

**Euro/US Dollar** The Euro traded within a tight range yesterday, closing marginally lower. It is currently trading around 1.1760. Pressure came from profit-taking and a rebound in the US Dollar Index, which was supported by reduced Fed rate cut expectations. Furthermore, safe-haven demand spurred by renewed Middle East tensions also weighed on the pair. Today, resistance is seen near 1.1850, with support around 1.1650.

**British Pound/US Dollar** The British Pound consolidated yesterday, ending the day with modest losses. It is currently trading around 1.3580. The pair faced pressure from profit-taking and a stronger US Dollar, which benefited from safe-haven flows amid Middle East tensions and waning Fed rate cut expectations. However, easing concerns over UK political uncertainty limited the downside. Today, resistance is seen near 1.3650, with support around 1.3500.