The US Bureau of Labor Statistics will publish October CPI on Tuesday, a release watched for its implications for the US Dollar and the Federal Reserve’s rate path. The report will omit 12-month percentage changes for most CPI series because October 2025 monthly data were not collected during the government shutdown from 1 October 2025 to 12 November 2025, leaving gaps for year-on-year comparisons in October 2026 where last year’s index is missing.
Consensus looks for headline CPI to rise 0.3% month-on-month after September’s 0.6%, with core CPI seen at 0.2% versus 0.3% previously, although one major bank expects 0.20% for both headline and core after 0.65% and 0.33%. Markets are pricing around an 80% chance of a 25 bps move at the last meeting of the year, after the Fed held rates at 3.75%–4.00%; recent labour data showed NFP up 165K and unemployment at 4.1%. Analysts flag scenarios where a 0.1% or lower CPI print and falling energy prices could curb December hike pricing, while a firmer CPI could reinforce it; technical levels cited for EUR/USD include resistance at 1.1260, 1.1335 and 1.1410, and support at 1.1130 then 1.1000.
Market Implications and Trading Strategies
With today’s October CPI release lacking 12-month comparison figures due to last year’s government shutdown, we should focus strictly on month-over-month shifts. Historical data shows that US CPI announcement days generate an average intraday EUR/USD movement of 60 to 80 pips, making short-dated volatility strategies attractive. If headline inflation drops to 0.1% or lower alongside falling oil prices, we should prepare to trim long US Dollar positions as markets rapidly price out a December interest rate hike.
Conversely, if monthly core CPI meets or exceeds the 0.3% forecast, we expect rate hike probabilities for December to solidify above 80%. In this scenario, we should look for short-term bearish plays on EUR/USD, targeting initial support around 1.1130. However, because strong expectations are already priced in, USD gains may remain capped, suggesting we keep target horizons brief to avoid reversal risk.
Broader Volatility and Technical Levels
We must also monitor spillover risks from equity markets, where technology stock pullbacks historically drive safe-haven flows into the US Dollar regardless of inflation prints. Midterm election shifts and ongoing diplomatic talks in the Middle East add another layer of volatility, as oil price dips could continue to suppress energy-driven inflation metrics. If equity markets drop sharply, we should favor holding US Dollar strength even if the monthly CPI print comes in softer than expected.
From a technical perspective, we are watching the 1.1260 resistance mark on EUR/USD alongside the 50-day moving average at 1.1335. If the pair breaks below the critical 1.1130 support level, we should position for a secondary decline toward the 1.1000 major psychological floor. Managing risk with tight stop-losses around these key technical barriers will be essential over the coming weeks as market drivers shift between Fed policy and broader risk sentiment.
