US Dollar Index struggles to recapture 100.00 ahead of US CPI, Asian markets plunge

• The DXY is facing barricades around the critical figure of 100.00.
• Investors are waiting for the release of the US CPI for further guidance.
• Chinese markets are bleeding on higher CPI print and lockdown measures in Shanghai.

The US dollar index (DXY) is struggling to reclaim the magical figure of 100.00 ahead of the release of the US Consumer Price Index (CPI), which are due on Tuesday. The US inflation is a major catalyst that will derive the likely monetary policy action by the Federal Reserve (Fed) in May. The mighty greenback basket is failing to recapture 100.00 despite the bleeding Asian markets, which are favoring a risk-off impulse amid negative market sentiment.

Estimate of the US CPI

A preliminary estimate of the US CPI at 8.3% is painting an uncertain picture for the market. The US inflation is elevating sharply backed by rising prices of base metals, oil and energy, and food prices. Therefore, investors should brace for higher volatility in the upcoming trading sessions and an aggressive rate hike from the Fed. Also, the tight labor market is advocating a jumbo interest rate from the Fed.

Bloodbath in the Asian Markets

Asian markets have witnessed a bloodbath on Monday as a stretch in China’s inflation print has trimmed the odds of a further rate cut by the People’s Bank of China (PBOC). China’s yearly Consumer Price Index (CPI) has landed at 1.5% higher than the street expectation and the prior figure of 1.2% and 0.9% respectively. At the press time, Hang Seng plunges 2.80%, China A50 drops 2.55%, Japan’s Nikkie225 down 0.75% and the Indian bourses tumble 0.50%. Also, with the lockdown restrictions in Shanghai, China has renewed fears of lower demand.

Key events this week: Consumer Price Index (CPI), Producer Price Index (PPI), Initial Jobless Claims, Retail Sales, Michigan Consumer Sentiment Index (CSI), and Industrial Production.

Eminent issues on the back boiler: Russia-Ukraine Peace Talks, Reserve Bank of New Zealand (RBNZ) interest rate decision, European Central Bank (ECB) interest rate decision, and Bank of Canada (BOC) interest rate decision.