15 Jan 2025

• The US Consumer Price Index is set to rise 2.9% YoY in December.
• The core CPI inflation is seen steady at 3.3% last month.
• The Fed is widely anticipated to keep interest rates unchanged in January.

• The US Consumer Price Index (CPI) report for December, a critical gauge of inflation, is set to be released on Wednesday at 13:30 GMT, courtesy of the Bureau of Labor Statistics (BLS).

  What to expect in the next CPI data report?

  The release of the CPI figures could boost the US Dollar's (USD) upward momentum, though it’s unlikely to prompt any immediate changes in the Federal Reserve’s (Fed) monetary policy plans, at least in the very near term.

  Inflation in the United States, as indicated by the Consumer Price Index (CPI), is anticipated to increase by 2.9% on an annual basis in November, a slight rise from the 2.7% recorded in the previous month. The core CPI inflation, which excludes the more volatile categories of food and energy, is expected to remain stable at 3.3% compared to the same period last year.
  
  On a monthly basis, projections indicate a 0.3% rise in the headline CPI and a 0.2% increase in core CPI.
  
  In anticipation of the report, analysts at TD Securities remarked: “We expect core inflation to decrease slightly after four consecutive reports showing stronger 0.3% month-over-month growth. We believe that deflation in goods will serve as a significant counterbalance to a probable increase in housing inflation. Year-over-year, headline CPI inflation is projected to rise to 2.9%, while core inflation is likely to remain unchanged at 3.3% year-over-year.”
  
  The release of the FOMC Minutes from the December 17-18 meeting revealed that Federal Reserve officials expressed concerns regarding the increasing risks of inflation rising further. They emphasized that potential changes in trade and immigration policies could complicate efforts to manage inflation effectively. The Minutes highlighted the possible economic and inflationary consequences of these policy adjustments, underscoring their significance in influencing the economic outlook of the United States.

  How could the US Consumer Price Index report affect EUR/USD?

  The forthcoming Trump administration is anticipated to adopt a more stringent approach to immigration, implement a more lenient fiscal policy, and reinstate tariffs on imports from China and Europe. These developments, along with a robust labor market, are expected to exert upward pressure on inflation and have already begun to alter investor expectations. Currently, markets foresee that the Federal Reserve will reduce interest rates by a mere 25 basis points this year, which is likely to maintain a stable outlook for the US Dollar in the near term.
  
  Nevertheless, as the US labor market cools gradually and inflation remains persistently high, the December inflation report is not expected to trigger significant changes in the Fed’s monetary policy. Presently, the CME Group’s FedWatch Tool suggests a 97% likelihood that the Fed will maintain current rates during its meeting on January 29.
  
  Regarding the EUR/USD, Pablo Piovano, Senior Analyst at FXStreet, provides his technical analysis. He highlights the 2025 low of 1.0176 (January 13) as the initial key support level, followed by the psychological threshold of 1.0000. Should this parity level be breached, the pair may test the November 2022 low of 0.9730 (November 3).
  
  On the resistance side, the 2025 high of 1.0436 (January 6) serves as the first barrier, followed by the provisional 55-day Simple Moving Average (SMA) at 1.0516, and the December peak of 1.0629 (December 6). Pablo also observes that the daily Relative Strength Index (RSI) has rebounded from the oversold zone. However, he warns that any potential recovery is likely to be limited and short-lived.