EUR/USD and GBP/USD Retreat as Dollar Rallies on Hot CPI Data

The US Dollar Index has staged a notable recovery following a hotter-than-expected CPI release, putting pressure on both EUR/USD and GBP/USD and raising questions about whether the recent dollar correction has concluded. Foreign exchange markets have shifted their focus toward energy prices as a key inflation driver, moving away from the tech-sector optimism that had previously influenced risk sentiment. The stronger inflation print reinforces expectations that the Federal Reserve may hold rates higher for longer, providing renewed support for the greenback across major pairs. EUR/USD has pulled back from recent highs as the dollar reasserts strength, while GBP/USD faces the dual headwinds of dollar resilience and domestic political uncertainty. The DXY rally suggests broad-based dollar demand, with traders reassessing the timing of potential Fed rate cuts. Technical levels on EUR/USD and GBP/USD will be critical in determining whether the recent dollar weakness was merely a corrective phase or the beginning of a sustained trend reversal. Energy price dynamics remain a key variable for inflation expectations ahead.