Markets across asset classes are positioning ahead of the highly anticipated US Consumer Price Index (CPI) release for April, with traders closely monitoring the impact of ongoing US-Iran tensions and energy market disruptions. Gold (XAU/USD) traded in positive territory near $4,750 during the early Asian session on Tuesday, buoyed by safe-haven demand as US President Donald Trump rejected an Iranian peace proposal, calling it 'totally unacceptable,' and later described the ceasefire as on 'life support' [1]. The heightened uncertainty has kept crude oil prices elevated, contributing to expectations that the headline US CPI will rise 3.7% year-over-year in April, up from 3.3% in March, with core CPI projected at 2.7% versus 2.6% prior [1][2].
The anticipation of hotter US inflation, partly attributed to surging oil prices and the ongoing closure of the Strait of Hormuz, has led to market speculation that the Federal Reserve may maintain higher interest rates for longer, potentially strengthening the US Dollar and weighing on USD-denominated commodities like gold [1][2][3]. Jim Wyckoff, a market analyst at American Gold Exchange, noted, 'There's just some bargain hunting coming in and positioning ahead of the U.S. inflation data this week' [1].
Currency markets are also reacting to the upcoming data. The Pound Sterling (GBP/USD) slipped from a recent peak near 1.3650 to 1.3610, with analysts highlighting that a hotter-than-expected US CPI would underscore how energy disruptions are feeding through to US prices and could weigh on Sterling [2]. The GBP/USD pair maintained a mild intraday bullish bias above 1.3584, but momentum was seen cooling after the earlier advance [2]. Meanwhile, the Australian Dollar (AUD/USD) remained capped below 0.7280, despite firmer-than-expected Chinese inflation data, as traders await the Australian Federal Budget and Q1 Wage Price Index data [3]. The Australian government is expected to announce a narrower deficit close to A$25 billion and a permanent A$10 billion fuel reserve in response to Iran-related supply shocks [3].
The broader macroeconomic environment, characterized by persistent energy supply disruptions and elevated inflation expectations, has underpinned safe-haven demand for the US Dollar and limited upside for risk-sensitive currencies like the Australian Dollar [3]. The closure of the Strait of Hormuz has entered its third month, with Washington's proposal to reopen the waterway still awaiting an Iranian response and fresh clashes reported over the weekend [2][3].
CONCLUSION
Markets are on edge ahead of the US CPI release, with geopolitical tensions and energy market disruptions driving inflation expectations higher. Safe-haven assets like gold are benefiting, while risk-sensitive currencies face headwinds. The outcome of the US inflation data is expected to set the tone for global markets in the coming days.