US November CPI to be released soon, investors focus on Federal Reserve's January interest rate policy direction

As the Federal Reserve’s January interest rate decision approaches, market attention is focused on the upcoming release of the US November Consumer Price Index (CPI) data. The Bureau of Labor Statistics (BLS) will release the latest inflation report on Thursday, which is a key reference point for assessing the Fed’s policy path in the current macro environment.

Due to previous government shutdown impacts on data collection, this CPI report will not include October data and will not provide month-over-month inflation figures for November. Therefore, the market is more focused on the year-over-year changes in CPI and core CPI to determine whether inflationary pressures are re-emerging. The market generally expects the November CPI year-over-year growth to be around 3.1%, with core CPI approximately 3.0%.

TD Securities analysts noted that rising energy prices could push overall inflation slightly higher than expected, with the annual CPI possibly rising to 3.2%, marking a relatively rapid increase this year, but core inflation is expected to remain stable. This structural divergence may lead the Fed to maintain a cautious stance in the short term.

Regarding interest rate expectations, the CME FedWatch tool shows that the market assigns less than a 20% probability of the Fed cutting interest rates by 25 basis points again in January. Although the latest employment data shows a slight increase in the unemployment rate, analysts believe this does not significantly alter the Fed’s policy outlook. Atlanta Fed President Bostic also stated that employment data is mixed; companies still face rising costs, and inflation risks have not been fully alleviated.

The market generally believes that if the November CPI rises to 3.3% or higher year-over-year, it will reinforce expectations that the Fed will keep rates unchanged and support the US dollar’s strength; conversely, if inflation drops to 2.8% or below, expectations for rate cuts may increase, and the US dollar could come under pressure.

From a technical perspective, the US dollar index remains relatively weak in the short term, but downward momentum has slowed. Analysts point out that support levels around 98.60 and 98.00 are critical, and CPI data results could serve as important catalysts for the short-term movements of the dollar and global risk assets.