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The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is inching lower after registering modest gains in the previous session. The DXY hovers around 99.10 during the Asian hours on Wednesday. Traders brace for the US Retail Sales and Producer Price Index (PPI) data later in the North American session.

The Greenback may further appreciate as the US Consumer Price Index (CPI) broadly met expectations, reinforcing views that the Federal Reserve (Fed) will likely hold policy steady this month, even as underlying price pressures showed signs of easing.

US Consumer Price Index rose by 0.3% month-over-month in December 2025, matching market expectations. The headline inflation remains at 2.7% increase year-over-year (YoY) as expected. Meanwhile, Core CPI, excluding food and energy, rose 0.2% in December, below market expectations, while annual core inflation held at 2.6%, matching a four-year low.

The US CPI data provided a clearer sign of easing inflation after earlier releases were skewed by shutdown effects. However, last Friday’s strong Nonfarm Payrolls report, a dip in the Unemployment Rate, and a solid four-week average ADP Employment Change point to a resilient labor market.

The upside impact of inflation data on the US Dollar could be offset by concerns over Fed independence. US federal prosecutors have threatened to indict Fed Chair Jerome Powell over his congressional comments on a building renovation project, raising questions about the central bank’s autonomy. The Trump administration has been pressuring the Fed to cut interest rates, with Powell describing the threat as a “pretext” to influence policy.

Traders remain cautious amid escalating geopolitical tensions. Reuters, citing the US-based HRANA rights group, reported on Wednesday that the death toll from Iran’s protests has reached 2,571. US President Donald Trump has urged Iranians to continue protesting, pledging that help is on the way.

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