Week Ahead: CPI Tests Dollar Strength

After a strong dollar run and fresh equity highs, traders now face a familiar question: pause or push further?

The current administration has framed economic security and national security as one system, using tariffs, energy access, and defense spending as linked tools rather than isolated policies.

Since 2025, tariff revenues have generated roughly $250 to $270 billion, helping fund domestic support measures while protecting industrial capacity.

Growth has remained firm, with US GDP estimated near 4.3 percent in Q3 2025 and closer to 5.4 percent in Q4. That resilience underpins dollar strength and reduces urgency for aggressive rate cuts, even as inflation trends lower.

Labour Data Anchors Dollar Strength
Last week’s US labour report delivered a mixed signal for markets. Nonfarm payrolls increased by 50,000 in December, falling short of expectations and pointing to a slower pace of hiring into the new year.

The unemployment rate edged lower to 4.4 percent, while average hourly earnings rose 0.3 percent month on month, keeping annual wage growth near 3.8 percent.

The combination of softer job creation and steady wage pressures left the dollar supported, but reduced conviction around near-term policy shifts.

The data pushed back against near-term rate cut expectations and helped drive broad-based dollar demand into the weekly close, particularly against the euro and yen.

Oil Keeps Afloat
Energy also sits at the centre of this framework. Increased US shale output alongside renewed Venezuelan supply has helped cap oil price volatility, easing inflation pressure while limiting OPEC’s pricing power.

For traders, this keeps energy-driven inflation spikes less likely in the near term, reinforcing the market’s current preference for range trading rather than crisis hedging.

The dollar remains a key beneficiary. With most energy trade still clearing through US channels, demand for dollar liquidity stays elevated.

This supports the greenback structurally, even as short-term moves respond to CPI and PPI data. Risks remain, including legal challenges to tariff authority and broader de-dollarisation efforts, but these sit more in the medium-term horizon than this week’s trade setups.

Against this backdrop, inflation data takes on added weight.

A steady CPI print would reinforce the idea of controlled disinflation within a strong growth and fiscal framework, keeping markets biased toward consolidation rather than sharp reversals.

Key Symbols to Watch
USDX | XAUUSD | EURUSD | SP500 | BTCUSD

For full view of upcoming economic events, check out VT Markets’ Economic Calendar.

Key Movements Of The Week
US Dollar Index (USDX)

- The dollar climbed all week and closed near the 99.10 resistance zone.
- Consolidation could open pullbacks toward 98.20 or 97.95.
- A break higher places focus on the 99.70 area.

Gold (XAUUSD)

- Gold pushed above the 4,500 swing high, extending the bullish structure.
- Follow-through above 4,550 would keep momentum intact.
- Failure to hold recent gains may invite short-term profit-taking.

SP500

- The index printed a fresh all-time high.
- Upside extension targets sit near 7,000 and 7,050.
- Traders may watch for slowing momentum after the strong run.

Bitcoin (BTCUSD)

- Bitcoin continues to trade within a wide range.
- 84,445 remains a key downside level to defend.
- Rallies toward 98,730 may face renewed selling pressure.

Bottom Line
US CPI will likely decide whether recent trends extend or stall, particularly after a strong start to the year for the dollar and US equities.

A steady inflation print supports the view of controlled disinflation rather than a rapid slowdown, keeping policy expectations anchored and volatility contained.

With inflation, growth, and policy narratives tightly linked, this week’s data flow may determine whether markets pause to digest gains or find room to push further.