On May 13th, data released by the U.S. Bureau of Labor Statistics (BLS) showed that the Consumer Price Index (CPI) for April rose by 3.8% year-on-year, surpassing the market expectation of 3.7% and marking the highest level since May 2023. The month-on-month increase was 0.6%, in line with expectations but down from the previous figure of 0.9%. The ongoing conflict in Iran has driven a sustained rise in gasoline prices, serving as the primary driver behind this acceleration in inflation. Excluding food and energy, the core CPI increased by 2.8% year-on-year, exceeding the expected 2.7% and reaching its highest level since September 2025. The core CPI rose by 0.4% month-on-month, also above the expected 0.3% and the previous figure of 0.2%. The better-than-expected data was influenced by multiple factors: the impact of the Iran conflict is permeating the price system through energy, airfare, and transportation costs; memory chip costs are experiencing uncontrolled increases due to the intensifying "AI race"; additionally, a one-time adjustment by the BLS to correct distortions in rent and housing data from October last year, caused by a government shutdown, also contributed to technical-level disruptions in the current data.

Furthermore, European Central Bank (ECB) Governing Council member and Bundesbank President Joachim Nagel stated that the possibility of the ECB needing to raise borrowing costs is increasing due to the impact of the Iran conflict. The German central bank chief said in an interview, "I still hold a glimmer of hope for a significant easing of the situation in the Middle East—but we cannot ignore high energy prices," adding, "Unless there is a fundamental change in the inflation situation, a rate hike is becoming increasingly likely." "We are no longer in the baseline scenario projected by the Eurosystem but are shifting towards an adverse scenario," Nagel said, referring to the different growth and inflation paths outlined by the ECB in March. The German official also warned, "We may still face considerable inflationary pressure in the future." He stated, "No one likes raising interest rates when growth is under significant pressure," but added, "Our mandate is to maintain price stability. In the long run, it benefits everyone if we clearly signal that we take the inflation target seriously and keep medium-term inflation around 2%. We will fulfill our mandate—no excuses."

Key data to watch today includes the eurozone's seasonally adjusted Q1 GDP quarter-on-quarter revision and the U.S. April Producer Price Index (PPI) year-on-year rate.

**Dollar Index** The Dollar Index rose in volatile trading yesterday, reaching a four-day high, with the current exchange rate hovering around 98.30. In addition to the ongoing support from safe-haven demand for the dollar due to renewed tensions in the Middle East, the better-than-expected U.S. inflation data released during the period, which reignited expectations for a Federal Reserve rate hike, was also a significant factor driving the index higher. Today, focus is on the resistance level near 98.80, with support around 97.80.

**EUR/USD** The euro declined in volatile trading yesterday, closing slightly lower on the daily chart, with the current exchange rate hovering around 1.1740. Besides profit-taking and technical selling pressure near the 1.1800 level, the sustained climb of the Dollar Index, supported by safe-haven demand and positive economic data, also significantly pressured the euro lower. Economic data released from Germany during the period performed well but had limited market impact. Today, focus is on the resistance level near 1.1850, with support around 1.1650.

**GBP/USD** The British pound declined in volatile trading yesterday, hitting an eight-day low, with the current exchange rate hovering around 1.3540. The primary reason for the pound's weakness was the rise of the Dollar Index, driven by safe-haven demand and positive economic data that reignited rate hike expectations. Additionally, renewed concerns about political uncertainty also exerted some pressure on the currency pair. Today, focus is on the resistance level near 1.3650, with support around 1.3450.