Market attention heading into the weekend will be on the US Consumer Price Index (CPI) for November, which is scheduled to be released at 9.30pm tonight (Thursday).
This inflation data is the Federal Reserve's (Fed) main reference in assessing the current level of price pressure and determining the direction of monetary policy for 2026. Any surprise from market expectations has the potential to trigger major movements in the currency and risk asset markets.
The Fed's efforts to bring inflation back to its 2% target have been increasingly challenging since last year, especially after the implementation of large-scale global tariffs by President Donald Trump earlier this year, which increased import costs and put pressure on the supply chain.
This factor has raised concerns that inflation may remain high for longer than initially expected.
At the same time, statements by Federal Reserve officials this week showed differences in views on the direction of monetary policy.
Fed Governor Christopher Waller said on Wednesday that the US central bank still has room to cut interest rates, following signs of a tightening in the labor market, which could potentially reduce inflationary pressures going forward.
However, Atlanta Fed President Raphael Bostic said the Fed's decision to cut interest rates last week was inappropriate, as inflation is not yet on a sustainable path towards its 2% target.
Market analysts expect the November CPI to remain stable at 3.0%, the same as October's reading.
This stability was driven by a modest decline in energy prices offset by still high utility and housing costs, thus maintaining core inflationary pressures.
Currency market reactions, particularly the US dollar (USD), are expected to be very sensitive to the data.
If the CPI records a higher-than-expected reading, the USD could strengthen on expectations that the Fed will keep interest rates high for a longer period. Otherwise, lower inflation could weaken the USD as the market begins to reassess the possibility of an early policy easing.
Overall, the November CPI report is not only a measure of current inflation conditions, but also a key determinant of global market sentiment heading into the end of the year, with the USD and Fed policy expectations remaining the main focus of investors.
