The US Bureau of Labor Statistics is set to release the closely watched Consumer Price Index data for November on Thursday at 13:30 GMT, with markets keenly focused on what the report may signal for the Federal Reserve’s next policy steps.
Due to disruptions caused by the government shutdown, the report will exclude October CPI figures and will not provide monthly CPI readings for November. As a result, investors will concentrate on the annual headline and core inflation figures to gauge underlying price pressures and their implications for the Fed’s policy outlook.
Inflation expected to stay elevated
Headline US inflation, as measured by the annual change in the CPI, is forecast to rise 3.1% year-over-year in November, slightly higher than September’s reading. Core CPI inflation, which strips out food and energy prices, is expected to increase at an annual pace of 3.0%, remaining well above the Fed’s 2% target.
TD Securities expects inflationary pressures to be somewhat stronger than consensus forecasts. The firm projects headline CPI to rise 3.2% year-over-year, marking the fastest pace since 2024, largely driven by higher energy prices. Core inflation, however, is seen holding steady at 3.0%, suggesting that underlying price pressures remain sticky.
Implications for the US Dollar and Fed policy
Ahead of the inflation release, markets are assigning roughly a 20% probability to a 25-basis-point interest rate cut at the Fed’s January meeting, according to the CME FedWatch Tool.
Recent US labor market data have done little to alter those expectations. The delayed employment report showed that Nonfarm Payrolls fell by 105,000 in October before rebounding by 64,000 in November, while the unemployment rate climbed to 4.6% from 4.4% in September. The sharp October decline was widely attributed to job losses linked to the government shutdown and was largely anticipated by investors.
Atlanta Fed President Raphael Bostic noted earlier this week that the mixed employment figures did not materially change the policy outlook. He also highlighted survey evidence pointing to rising input costs and firms’ determination to protect margins by passing higher prices on to consumers.
From a market reaction standpoint, a stronger-than-expected headline CPI reading of 3.3% or higher could reinforce expectations that the Fed will keep rates unchanged in January, potentially providing immediate support to the US Dollar. Conversely, a softer inflation outcome of 2.8% or below could revive expectations of a January rate cut, likely triggering renewed selling pressure on the greenback.
Technical outlook for the US Dollar Index
According to FXStreet analyst Eren Sengezer, the near-term technical picture for the US Dollar Index remains bearish, although downside momentum appears to be fading. The daily Relative Strength Index has recovered above the 40 level, while the index continues to hold above the 50% Fibonacci retracement of the September–November uptrend.
On the upside, the 100-day Simple Moving Average at 98.60 is seen as a key pivot. A sustained move above this level could discourage technical sellers and expose resistance at 98.85, followed by the 99.25–99.40 zone, where the 200-day SMA and the 23.6% Fibonacci retracement converge.
On the downside, initial support is located at 98.00, corresponding to the 61.8% Fibonacci retracement, ahead of deeper support levels at 97.40 and the psychological 97.00 mark.
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