US Dollar Index (DXY) pares losses as US inflation data loom

• Near 101.80, the US Dollar Index (DXY) reaches a session high and moves into positive territory on the daily chart.
• Monday’s 0.6% reversal leaves the index near the bottom of its four-week trading range.
• With key year-on-year readings absent, US CPI data may have a limited effect on the US Dollar.

Having reached a session high of 101.77, the USD Index (DXY), which tracks the US Dollar against a basket of six major currencies, has moved into positive territory on the daily chart. Nevertheless, it remains under pressure after Monday’s 0.6% reversal. The US Dollar (USD) is making modest gains against most of its peers on Tuesday as markets remain quiet ahead of the US Consumer Price Index (CPI) release, although falling oil prices are weighing on safe-haven currencies, including the Greenback.

An unusual feature of the forthcoming US consumer inflation report is the absence of the key year-on-year reading. Data collection was interrupted by last year’s government shutdown, leaving no October 2025 figure against which to compare this year’s inflation.

For October, however, monthly inflation is expected to ease. In a note, Danske Bank says its US economists “expect inflation to have come down from its September pace, with both headline and core at +0.20% on the month,” after headline CPI recorded its fastest monthly rise in six months at +0.65%.

US Dollar Comes Under Pressure as Falling Oil Prices Lift Risk Appetite

More broadly, the sharp fall in oil prices has left the US Dollar on the defensive by encouraging investors to favour currencies perceived as riskier. These include the risk-sensitive NZD and AUD, as well as the Euro and the British Pound.

After President Donald Trump "downplayed the likelihood of renewed military strikes on Iran.", Brent crude "slipped towards its 200-day moving average at $93.85 a barrel", according to analysts at Brown Brothers Harriman, who observe that "risk appetite is recovering,"

A partial rebound in equity markets this week, following last week’s AI-driven sell-off, is also helping to restore investors’ appetite for risk and maintain pressure on the USD. 

In this environment, key support at 101.00-101.20 remains relatively close as the DXY continues to trade towards the bottom of its four-week range. By contrast, the 102.35-102.50 area, which held back bullish advances in late October and early November, appears beyond reach for now.