The U.S. Bureau of Labor Statistics (BLS) will release the December Consumer Price Index (CPI) report on Tuesday at 1:30pm Japan time. The report is expected to show that prices remain broadly stable in the final months of 2025. As always, this report is important reading regarding inflation, which could trigger near-term movements in the US dollar (USD).
Still, the overall picture of the Federal Reserve is unlikely to change for now. Policymakers remain primarily focused on the health of the domestic labor market, and the statistics will likely need to come as a real surprise to prompt a rethink of monetary policy.
What to expect from the next CPI data report?
Inflation itself is not expected to cause many surprises. The headline CPI is expected to rise 2.7% year-on-year in December, unchanged from the previous month. If you remove the more volatile food and energy components, the situation is much the same. Core inflation is expected to rise slightly, from 2.6% to 2.7%, but still uncomfortably above the Fed’s target.
On a monthly basis, headline CPI and core CPI are both expected to remain roughly stable at 0.3%, reinforcing the view that inflation will only ease slowly rather than reverse.
This also explains why December’s rate cut wasn’t much at all. Minutes of the meeting released on December 30 showed that the committee was sharply divided, with several officials saying the talks were delicately balanced and that leaving rates on hold was a very realistic option.
Analysts at TD Securities noted the following while previewing the report:
“We expect core sector growth to peak at 3% in the second quarter as a result of the government shutdown. We remain of the view that inflation will gradually subside in the second half of 2026. We expect core CPI inflation to end the year at 2.6%.”
What impact could the US Consumer Price Index report have on EUR/USD?
While investors are still weighing mixed signals from December’s nonfarm payrolls (NFP), that debate is starting to take a backseat. New threats to the Fed’s independence have resurfaced, and they risk completely overshadowing the significance of Tuesday’s inflation numbers.
Given that the Fed is still keeping a close eye on the labor market, December’s CPI data is unlikely to meaningfully change the policy mix unless inflation somehow causes a real surprise.
Turning to EUR/USD, FXStreet senior analyst Pablo Piovano gave his technical outlook.
“If EUR/USD falls decisively below the short-term 55-day moving average of 1.1639, it will open the door to a deeper pullback, with the 200-day SMA of 1.1561 coming into focus sooner or later,” he said. “Below that, the November low of 1.1468 (November 5th) will be the focus, followed by the August low of 1.1391 (August 1st).” “On the other hand, a clean break above the December peak of 1.1807 (Dec. 24) would bring the underlying trend back to the upswing. That would put the 2025 high of 1.1918 (Sept. 17) in the spotlight, with the psychologically important 1.2000 level lurking just beyond that,” Piovano added.
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