ATFX: US May CPI Data is Coming, Mainstream Expectations Point to Continued Inflation Heating Up

ATFX: The US CPI data for May will be released at 20:30 Beijing time. The market expects the year-on-year CPI rate for May to be 4.2%, higher than the previous value of 3.8%, indicating continued inflationary pressure. The expected core CPI year-on-year rate is 2.9%, slightly above the previous 2.8%. The expected rise in the CPI rate is directly attributed to high oil prices leading to increased fuel costs. The rise in the core CPI rate is due to high fuel prices indirectly affecting other consumer goods through increased transportation and raw material costs.

The chart above shows the superimposed curves of the US year-on-year CPI and core CPI rates over the past three years - ATFX

Since February 2026, the US CPI and core CPI year-on-year rates have shown a clear upward trend. The conflict between the US and Iran erupted on February 28th. Since March, international oil prices have remained in a high range, perfectly matching the trend of the US CPI data curve. It can be argued that the high US inflation expectations since February this year have been caused by the US-Iran conflict.

Whether the May CPI data rises or falls also depends on the changes in the US-Iran situation in May. In terms of timeline, the US-Iran conflict began on February 28th. A two-week ceasefire agreement was reached on April 8th, and the ceasefire was extended to sixty days on May 23rd. There were no substantial large-scale conflicts between the US and Iran in May, and international oil prices generally maintained a downward trend.

The chart above shows the daily price chart of US crude oil - ATFX

In May, the opening price was $105.14, and the closing price was $87.36, a decline of over $7. Logically, the drop in crude oil prices in May likely means the fuel component in the CPI data fell year-on-year, which would drag down the May CPI figure. However, as high oil prices have persisted for two months, other consumer goods have already been indirectly affected by price increases. We believe that while the CPI year-on-year rate may continue to rise, considering the downward trend of international oil prices in May, the final published figure is highly unlikely to reach the market expectation of 4.2%. It is more probable that the final result will be flat with the previous 3.8% or below 4.0%. As for the core CPI year-on-year rate, the market's expectation of 2.9% already factors in the drop in fuel prices and the indirect inflationary impact on other goods, making it a more likely outcome.

If the final published May CPI figure is higher than the previous value, it means the US high inflation problem will persist, increasing the probability of the Fed raising interest rates once in the second half of the year. The US dollar benefits while gold suffers. In reality, in the absence of a significant drop in international oil prices, high inflation risks will persist in various countries. Not only does the Fed have rate hike expectations, but the ECB, the Bank of England, and even the Bank of Japan also have plans to raise rates. The clustering of these tightening monetary policies poses a significant challenge to gold's safe-haven and value-preserving attributes.

ATFX Risk Warning, Disclaimer, Special Statement: The market carries risks, invest with caution. The above content only represents the analyst's personal views and does not constitute any investment advice. Do not treat this report as the sole reference. Analyst views may change over time, and updates will not be notified separately.