The US Bureau of Labor Statistics (BLS) is set to release the Consumer Price Index (CPI) for December on Tuesday at 13:30 GMT. The data is expected to show that inflation pressures remained broadly stable toward the end of 2025. As one of the most closely watched inflation gauges, the report could prompt short-term volatility in the US Dollar (USD), though its impact on broader policy expectations is likely to be limited.
Despite its importance, the CPI release is unlikely to alter the Federal Reserve’s policy trajectory in the near term. With Fed officials placing greater emphasis on labour market conditions, inflation data would need to deliver a clear and unexpected shock to prompt a reassessment of monetary policy.
What the latest CPI report may show
Market expectations point to a steady inflation backdrop. Headline CPI is forecast to rise by 2.7% year-on-year in December, matching November’s reading. Core CPI, which excludes food and energy prices, is expected to tick up marginally to 2.7% from 2.6%, remaining above the Fed’s long-term target.
On a monthly basis, both headline and core inflation are projected to increase by 0.3%, reinforcing the view that disinflation is progressing gradually rather than accelerating.
This persistent inflation helps explain why December’s rate decision was so finely balanced. Minutes from the Federal Open Market Committee, released on December 30, revealed a divided panel, with several policymakers noting that holding rates steady was a realistic alternative.
Analysts at TD Securities commented ahead of the release: “Following the impact from the government shutdown, we now expect the core segment to peak at 3% in Q2. We continue to see gradual disinflation as the dominant theme in the second half of 2026, with core CPI ending the year around 2.6%.”
Potential impact on EUR/USD
Markets are still digesting mixed signals from December’s Nonfarm Payrolls report, but that discussion is fading. Renewed concerns about threats to the Fed’s independence risk overshadowing the CPI data, potentially muting its market impact.
As long as the Fed remains focused on employment trends, December’s inflation figures are unlikely to shift expectations in a meaningful way—unless the data delivers a clear upside or downside surprise.
From a technical perspective, XtremeMArkets Senior Analyst Frank notes that a decisive move in EUR/USD below the 55-day simple moving average at 1.1639 could trigger a deeper correction. In that scenario, the 200-day SMA at 1.1561 would come into focus, followed by the November low at 1.1468 and the August trough at 1.1391.
Conversely, a firm break above the December high at 1.1807 would restore a bullish bias, opening the way toward the 2025 peak at 1.1918 and potentially the psychological 1.2000 level beyond.
