FX Daily: Headlines from Beijing can cap USD in Daily Currencies Ratings 14/05/2026 USD: Hot PPI raising some concerns The US PPI report published yesterday was a bit of a shocker, with the headline jumping 1.4% MoM (consensus 0.5%) and the measure excluding food and energy by 1.0% MoM (consensus 0.3%). The only silver lining is that the acceleration was heavily driven by airfares (+3% MoM), while inflation in components feeding into the Fed‑preferred core US PCE measure remained relatively muted. Still, the print rings alarm bells for the Fed, with December pricing edging above 10bp of tightening. The bond market is also failing to show much stress. 10y breakeven rates (a measure of inflation expectations) are now at 2.5% and the 2y close to 3%. In our rates teams’ view, that’s still relatively tame. The break above 4.50% in 10-year yields would catapult us back to the chaotic tariff summer of 2025 in terms of levels, but this is a much better-behaved bond market, and higher yields should support USD, not harm it as they did in 2025 when fiscal concerns were mounting. A lack of progress in Gulf negotiations would argue for further USD gains, but much of the focus today and tomorrow will be on Trump’s visit to China. Historically, face‑to‑face summits involving the US president have tended to generate a slew of conciliatory headlines, which can bolster risk assets. In particular, any hints that China could play a more active role in pressuring Iran towards a peace deal would likely be well received. Ultimately, tangible progress would be required to push the dollar back to last week’s lows, but constructive headlines out of Beijing should be sufficient to keep a cap on the greenback for now. Francesco Pesole EUR: Short-term fair value at 1.180 The euro is still attracting buyers at 1.1700. While that might sound counterintuitive, given that oil prices are steadily above $100, our model tells us that the short-term fair value is currently at 1.180. The main driver re