The S&P 500, Nasdaq 100 and Dow Jones all hit fresh record highs following the CPI release, while European and UK benchmarks also reached new peaks. However, some analysts warn that the market's optimism may be premature.

"The soft CPI data could've certainly marked the end of this year's positive trend but people still took into consideration that the producer price data released just a bit earlier than the US CPI last week came in hotter-than-expected," noted Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank.

She pointed to comments from JPMorgan CEO Jamie Dimon that "costs linked to the green economy, remilitarization, infrastructure spending, trade disputes, and large fiscal deficits may mean inflation will stay sticky".

Attention is now turning to earnings from technology giant Nvidia, seen as a bellwether for the AI-driven rally that has propelled markets higher this year. The chipmaker is expected to post sales of around $11 billion for the quarter, with strong demand for its AI chips likely to continue.

However, Nvidia shares are trading just below the $1,000 level, and Ms Ozkardeskaya said any disappointment in the results "has potential to trigger a broader market selloff, especially across the technology stocks".

"The price-to-estimated earnings of the S&P 500's technology sector bounced above the 28 level, which has acted as an important resistance since 2020. Therefore, the current levels could well be appropriate for a correction," she warned.

Central bank meetings will also be in focus this week, with the Reserve Bank of New Zealand expected to keep rates on hold at 5.5% and the Federal Reserve to release minutes from its last policy meeting. In the UK, inflation is tipped to fall sharply in April, potentially boosting rate cut bets.

Commodity prices are being supported by the prospect of looser monetary policy and fresh stimulus measures in China, with US crude oil testing $80 per barrel and copper futures hitting all-time highs.

But with valuations stretched and the path of inflation still uncertain, Ms Ozkardeskaya said markets may be vulnerable to a pullback. "Regardless of the warnings, the equity market cleared an important barrier to the present optimism," she said. "This week's results will either send [Nvidia] above this $1,000 level or trigger profit taking near it."