US Dollar Index Breaks Above 100 as Hot May CPI Data Tempers Rate Cut Hopes

Amid persistent inflationary pressures in the world's largest economy, the US Dollar staged a significant rally following May CPI readings that exceeded analyst expectations. These hot inflation figures have effectively tempered market hopes for imminent Federal Reserve rate cuts, bolstering the greenback's yield appeal. According to reports, the US Dollar Index (DXY) achieved a decisive breakout above the 100 level, while the Euro and British Pound faced intensified pressure, with EUR/USD testing critical support zones.

This dollar strength is further supported by a resilient labor market, as US Non-Farm Payrolls added 172k jobs in June 2026, significantly beating the forecast of 85k per market data. In contrast, the Eurozone showed signs of economic cooling, with annual GDP growth slowing to 0.3% from a previous 1.2%, widening the policy divergence between the Fed and the ECB. With the US unemployment rate holding steady at 4.3% as of June 5, 2026, the Federal Reserve maintains more flexibility to keep rates elevated compared to its G7 peers.

Traders should watch for the DXY's ability to sustain its position above the 100 psychological mark as a confirmation of this bullish trend. Upcoming catalysts include global inflation updates and central bank commentary which may further clarify the interest rate outlook. Key support levels for EUR/USD remain under scrutiny, especially following the Eurozone's quarterly GDP contraction of -0.2% recorded as of June 5, 2026, which continues to weigh on the single currency.