US inflation data in focus as US Dollar Index (DXY) pares losses

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

Markets remain calm ahead of the US Consumer Price Index (CPI) release on Tuesday, with the US Dollar (USD) edging higher against most peers. However, falling oil prices are putting pressure on safe-haven currencies, including the Greenback. After reaching 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. Even so, it remains under pressure following Monday’s 0.6% reversal.

An unusual feature of this 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 reading against which to compare this year’s inflation.

On a monthly basis, however, inflation is expected to have eased in October. 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,” following a +0.65% increase in headline CPI, the fastest monthly rise in six months.

Is Falling Oil Supporting Risk Appetite at the US Dollar’s Expense?

The broader picture remains unfavourable for the US Dollar. A sharp fall in oil prices has prompted investors to favour currencies perceived as riskier, particularly the risk-sensitive NZD and AUD, as well as the Euro and the British Pound.

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

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

In this environment, the DXY continues to trade towards the bottom of its trading range over the past four weeks. Key support at 101.00-101.20 is relatively close, whereas the 102.35-102.50 zone, which held back buyers in late October and early November, currently appears beyond reach.