← Back to posts🧠Dollar steadies as markets wait for CPI and BoJ

🧠Dollar steadies as markets wait for CPI and BoJ

Published: 12/17/2025

Overall Market Sentiment:

Global mood is cautious and slightly risk off. Equities have eased from recent highs, volatility is back around the mid teens, and the dollar is attempting to stabilise from recent softness as traders focus on US CPI on December 18 and the Bank of Japan decision later this week.





Geopolitics



Oil is being pulled in two directions: optimism around a Russia Ukraine peace framework versus renewed tension around sanctioned Venezuelan flows. Even so, pricing is still being dominated by a surplus leaning narrative, with Brent recently trading around the low 60s and pressing toward the high 50s to low 60s area.


For FX, softer crude is a mild headwind for oil linked currencies like CAD and NOK, while it helps keep inflation expectations contained. That typically supports lower long term yields and can reduce the urgency for USD strength as an inflation hedge.


Key level to watch: Brent in the 59 to 60 area. A sustained break lower reinforces disinflation and weighs on producer FX. A bounce back above the low 60s would reduce that drag.





Currency outlooks




🔻 USD: Risks still lean to gradual softness



The dollar index is trying to stabilise near the high 98s after recent weakness, but the broader bias still leans softer as markets weigh slowing momentum and the Fed’s cumulative easing.


The latest official labour report showed payroll growth of 64k in November and unemployment at 4.6%, which reinforces a cooling labour narrative. Note that October data were not published, so comparisons should be framed versus earlier months, not an “October loss” print.


The next big test is CPI on Dec 18. With data flow recently distorted, the market reaction is likely to be outsized if CPI meaningfully surprises either way.


Near term, risks still tilt toward gradual USD softness if inflation is benign and activity indicators keep cooling. A firmer CPI print would be the clearest path to a sharper USD bounce.





🔺 EUR: Supported by dollar drift, but momentum softer



EURUSD is still supported by the broader USD downtrend, though near term momentum has cooled as the dollar steadies. The euro’s relative support remains the “ECB on hold” profile versus a Fed that has already moved into cuts.


For the week ahead, the main driver is the US CPI impulse. If CPI reaffirms disinflation, EURUSD can re test the upper end of the recent range. If CPI is hot, EURUSD is vulnerable to a pullback.


Key reference level: 1.18 as an overhead resistance area.





🔻 GBP: Lower CPI increases BoE easing risk



UK inflation fell to 3.2% year on year in November, down from 3.6% in October.

That outcome increases near term sensitivity around the Bank of England decision and guidance, because it strengthens the case that policy can lean more dovish if the growth backdrop stays soft.


Key area: 1.33 to 1.34 as the near term band defining whether sterling is consolidating or rolling over.





⚖️ CAD: Stronger data versus weak oil



CAD has been supported by comparatively steadier domestic momentum and a more stable BoC narrative, but sub 60 to low 60s oil is a real headwind if it persists.


Near term, the pair is likely to stay range bound unless US CPI drives a broad USD repricing.


Key area: USDCAD 1.37 to 1.38 as the immediate consolidation zone.





🔻 CHF: Very strong starting point limits upside



CHF remains strong in real terms with inflation very low, which reduces the fundamental case for large additional appreciation unless global risk sentiment deteriorates sharply. With risk only mildly defensive, the balance of risk leans toward slow mean reversion rather than a fresh CHF surge.


Key reference levels: USDCHF 0.79 to 0.80, EURCHF 0.93 to 0.94.





🔺 JPY: BoJ expectations keep yen supported on the crosses



USDJPY is holding below the mid 155 region as markets remain focused on the Bank of Japan decision and the possibility of a more normal policy path. The bigger picture driver remains policy convergence versus the US, with CPI tomorrow setting the US leg of that story.


Key level: 155 as a pivot.





⚖️ AUD: Hawkish leaning RBA versus firmer USD



AUD is balancing two forces: relatively firm domestic rate expectations versus a softer commodities impulse and a steadier USD tone. Until CPI lands, AUDUSD is likely to stay choppy around the 0.66 handle.





⚖️ NZD: Hawkish cut keeps a floor, but global risk matters



NZD remains supported by its yield profile, but it is still highly sensitive to global risk and USD swings. Near term, the pair likely stays inside a 0.57 to 0.59 band unless CPI shocks.





Cross asset wrap



  • 🪙 Gold: Gold holding above the low 4,300s is consistent with a market that still wants a macro hedge into key data.
  • 🛢 Oil: Brent near the low 60s and flirting with the high 50s keeps pressure on oil FX and reinforces the disinflation narrative.
  • 📈 Stocks: Equities are easing but not breaking, which fits “cautious” rather than “stress.”
  • ₿ Crypto: BTC is fluctuating in the mid 80k region and remains highly sensitive to CPI and real yield swings.






This is general, educational market commentary only. It describes how macro data, policy expectations and sentiment are interacting across FX and major assets. It is not investment advice and not a trading signal.