Week Ahead: CPI Puts Dollar Momentum to the Test

After a strong run in the dollar and fresh record highs in equities, traders face a familiar dilemma: consolidate or extend?

The current administration continues to frame economic security and national security as part of a single framework, treating tariffs, energy access, and defense spending as interconnected tools rather than standalone policies.

Since 2025, tariff revenues have generated an estimated $250–$270 billion, helping finance domestic support measures while reinforcing industrial capacity.

Growth momentum has remained solid, with US GDP estimated at around 4.3 percent in Q3 2025 and accelerating toward 5.4 percent in Q4. This resilience underpins dollar strength and reduces urgency for aggressive rate cuts, even as inflation trends gradually lower.

Labour Data Anchors Dollar Strength

Last week’s US labor report sent mixed signals to markets. Nonfarm payrolls rose by 50,000 in December, missing expectations and pointing to a slower pace of hiring as the year begins.

The unemployment rate edged down to 4.4 percent, while average hourly earnings increased 0.3 percent month on month, keeping annual wage growth near 3.8 percent.

This combination of softer job creation and steady wage pressure left the dollar supported but tempered conviction around imminent policy shifts.

The data pushed back against near-term rate cut expectations and helped drive broad-based dollar demand into the weekly close, particularly versus the euro and the yen.

Oil Keeps Inflation Risks Contained

Energy remains central to this macro framework. Rising US shale output alongside renewed Venezuelan supply has helped cap oil price volatility, easing inflation pressures while limiting OPEC’s pricing leverage.

For traders, this reduces the likelihood of energy-driven inflation spikes in the near term, reinforcing the market’s preference for range trading rather than crisis hedging.

The dollar continues to benefit structurally. With much of global energy trade still clearing through US channels, demand for dollar liquidity remains elevated.

This supports the greenback even as short-term price action responds to CPI and PPI data. Risks persist, including legal challenges to tariff authority and longer-term de-dollarization efforts, but these remain medium-term considerations rather than drivers of this week’s setups.

Against this backdrop, inflation data carries added significance.

A stable CPI print would reinforce the narrative of controlled disinflation within a strong growth and fiscal environment, keeping markets biased toward consolidation rather than sharp reversals.

Key Symbols to Watch

USDX | XAUUSD | EURUSD | SP500 | BTCUSD

Key Events of the Week

Key Movements of the Week

US Dollar Index (USDX)

• The dollar climbed throughout the week and closed near the 99.10 resistance zone.
• Consolidation may open pullbacks toward 98.20 or 97.95.
• A break higher shifts focus toward the 99.70 area.

Gold (XAUUSD)

• Gold pushed above the 4,500 swing high, extending its bullish structure.
• Sustained trade above 4,550 keeps momentum intact.
• Failure to hold gains could invite short-term profit-taking.

S&P 500

• The index printed a fresh all-time high.
• Upside extension targets sit near 7,000 and 7,050.
• Traders may watch for momentum to slow after the strong advance.

Bitcoin (BTCUSD)

• Bitcoin remains in a broad trading range.
• 84,445 continues to act as a key downside level.
• Rallies toward 98,730 may encounter renewed selling pressure.

Bottom Line

The US CPI is likely to determine whether recent trends extend or pause, following a strong start to the year for both the dollar and US equities.

A steady inflation print supports the case for controlled disinflation rather than a sharp slowdown, keeping policy expectations anchored and volatility contained.

With inflation, growth, and policy narratives closely intertwined, this week’s data may decide whether markets pause to digest gains or find room to push further.

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