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

• 101.80 is within reach as the US Dollar Index (DXY) sets session highs and moves into positive territory on the daily chart.
• After Monday’s 0.6% reversal, the index continues to trade near the bottom of its four-week range.
• The absence of key year-on-year readings could limit the US Dollar’s response to US CPI data.

101.77 marks the session high for the USD Index (DXY). The index, which tracks the US Dollar against a basket of six major currencies, has moved into positive territory on the daily chart but remains under pressure after Monday’s 0.6% reversal. On Tuesday, the US Dollar (USD) is edging higher against most peers as markets remain calm ahead of the US Consumer Price Index (CPI) release. Lower oil prices, however, are weighing on safe-haven currencies, including the Greenback.

This US consumer inflation report will take an unusual format, with the key year-on-year reading unavailable. Data collection was interrupted by last year’s government shutdown, leaving no October 2025 reading against which to compare this year’s inflation.

For October, monthly inflation is nevertheless 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," following a +0.65% headline CPI increase, the fastest monthly pace in six months.

Lower oil prices lift risk appetite and pressure the US Dollar

The broader backdrop remains unfavourable for the US Dollar. A sharp fall in oil prices has encouraged investors to favour currencies perceived as riskier, notably the risk-sensitive NZD and AUD, alongside 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 supporting investors’ appetite for risk. That recovery is maintaining pressure on the USD. 

In this environment, the DXY remains near the bottom of its trading range for the past four weeks. Key support at 101.00-101.20 is relatively close, whereas the 102.35-102.50 zone, which halted advances in late October and early November, appears beyond reach for now.