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The Euro (EUR) is trading flat to the US Dollar (USD) and consolidating in a tight range following Monday’s attempt at a bullish reversal of the pullback from mid/late December, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Sentiment drives Euro amid stable short-term rates

"Short-term rate expectations look to be finding some stabilization following their recent pullback, and spreads (vs. the US) are doing much of the same. EUR continues to be driven by sentiment as we note the strong correlation to movement in risk reversal, currently at 0.9 on a 21 day rolling basis."

"Short-and medium-term technical signals are neutral, as reflected in an RSI that continues to hover around the 50 threshold and a broader flat range that has defined much of the EUR’s price action since June."

"The recent pullback looks to have been halted by support at the 50 day MA (1.1657) and the local range looks to be defined by support at 1.1620 and 1.1800. We look to a near -term range bound between 1.1620 and 1.1720."

• Gold ticks higher after US inflation data as softer core CPI keeps Fed easing hopes alive.
• Safe-haven demand remains firm, underpinned by geopolitical tensions and uncertainty around Federal Reserve independence.
• Technically, the broader trend remains bullish, but near-term price action suggests a period of consolidation or pullback risk.

Gold (XAU/USD) edges modestly higher on Tuesday as traders react to the latest US inflation data. At the time of writing, XAU/USD trades around $4,615, up nearly 0.6%, just shy of Monday’s record high near $4,630.

Data released by the US Bureau of Labor Statistics (BLS) showed that headline Consumer Price Index (CPI) inflation came in broadly in line with expectations, while core inflation undershot expectations, keeping theFederal Reserve (Fed) inclined toward further monetary policy easing.

The precious metal remains underpinned by steady safe-haven demand as geopolitical and economic uncertainty keep investors cautious. Markets remain unsettled by the criminal investigation into Fed Chair Jerome Powell, which has revived concerns over the central bank's independence.

At the same time, risk sentiment has been hit by fresh geopolitical developments after US President Donald Trump threatened a 25% tariff on countries doing business with Iran amid nationwide anti-government protests.

This follows earlier US actions in Venezuela, where Washington carried out a military operation against President Nicolás Maduro, as well as Trump’s renewed rhetoric over strategic interests in Greenland.

Market movers: Markets jittery as DOJ probes Powell, Fed independence in focus

• The US Department of Justice issued grand jury subpoenas as part of a criminal investigation into Federal Reserve Chair Jerome Powell, linked to his Senate testimony on the Fed’s $2.5 billion headquarters renovation project. Powell said the move is politically motivated and stressed that the Fed will continue to set policy based on economic conditions rather than political pressure.
• Adding to concerns over Fed independence, US President Donald Trump is expected to announce a potential replacement for Jerome Powell later this month, with Powell’s term as Fed Chair ending in May 2026. Markets widely expect Trump to nominate a candidate more closely aligned with his policy views, reinforcing uncertainty around the future direction of US monetary policy.
• On the monetary policy front, markets are currently pricing in around two Fed rate cuts this year. However, last week’s US employment report showed the labour market is holding up better than many feared, tempering expectations for aggressive easing and reinforcing the view that the Fed can afford to keep interest rates unchanged at its January meeting.
• Attention also remains on the US Supreme Court, which is due to hold an opinion day on Wednesday on the legality of Trump-era tariffs. At the same time, the court is set to hear arguments on January 21 in the case over Trump’s attempt to remove Fed Governor Lisa Cook.
• Major investment banks remain broadly bullish on Gold’s outlook. Bank of America, JPMorgan, Goldman Sachs, Morgan Stanley and UBS expect prices to hold in the $4,500-$5,000/oz range through 2026, citing anticipated Fed rate cuts, rising debt concerns, steady central bank and ETF buying, and persistent geopolitical uncertainty, according to Reuters.

Technical analysis: Strong trend persists despite overbought conditions

On the 4-hour chart, the 21-period Simple Moving Average (SMA) has crossed above the 50-period SMA, with both indicators sloping higher, reinforcing the prevailing uptrend.

Price action remains comfortably above its key moving averages, with the 21-SMA near $4,534.94 acting as the first layer of dynamic support, followed by the 50-SMA around $4,468.91.

Momentum indicators remain constructive. The MACD is holding above its signal line in positive territory, while the modestly expanding histogram points to firm bullish momentum.

Meanwhile, the RSI stands at 70.88, flashing overbought conditions, which suggests the rally may pause or consolidate in the near term. Any pullback, however, could be viewed as corrective rather than trend-changing, keeping the broader technical bias tilted to the upside.

(The technical analysis of this story was written with the help of an AI tool.)

• US headline CPI comes in line with expectations,  while core inflation softened modestly.
• Tensions surrounding Fed independence continue to weigh on the US Dollar.
• The Swiss Franc benefits from geopolitical and institutional uncertainty.

USD/CHF trades around 0.7980 on Tuesday at the time of writing, up 0.10% on the day, but off its intraday high following the release of US inflation data. The pair reacted moderately to the macroeconomic figures, as markets remain torn between inflation data, which remains stable, and a political backdrop that continues to weigh on the US Dollar (USD).

The US headline Consumer Price Index (CPI) rose 2.7% YoY in December, according to the Bureau of Labor Statistics (BLS), matching November’s increase and fully in line with market forecasts. However, core Consumer Price Index, which excludes the volatile food and energy components, remained unchanged at 2.6% on an annual basis, missing expectations of an increase to 2.7%. On a monthly basis, headline CPI increased by 0.3%, while core CPI rose by 0.2%. The report highlights that shelter costs remain the main driver of monthly inflation, while food and energy prices also recorded moderate increases.

These figures reinforce the view of a gradual but incomplete disinflation process, leaving limited room for the Federal Reserve (Fed) to quickly alter its monetary policy path. Markets are now pricing in around a 95% chance that the Fed will keep interest rates unchanged at its January meeting, while expectations for a rate cut as early as March have dropped sharply in recent days, according to the CME FedWatch tool.

At the same time, labor market indicators are sending mixed signals. The four-week average of weekly private employment changes reported by Automatic Data Processing (ADP) edged up to 11,750 jobs per week in mid-December, from 11,000 previously. This confirms that job creation in the US private sector remains positive, but at a modest pace, insufficient to fully dispel concerns about an economic slowdown.

The US Dollar, however, remains undermined by non-economic factors. Reports of a criminal investigation targeting Fed Chair Jerome Powell have reignited concerns about the central bank’s independence. This situation is part of a long-running conflict between US President Donald Trump and the Fed Chair, fueling institutional unease that weighs on monetary policy credibility. Several major central banks have issued a joint statement in support of Jerome Powell, underlining the importance of central bank independence.

Credit rating agencies are closely monitoring developments. Fitch Ratings recalled that Federal Reserve independence is a key pillar supporting the US sovereign rating, while S&P Global Ratings also stressed that Fed credibility is a cornerstone of US institutional strength. These statements contribute to keeping a political risk premium embedded in the US Dollar.

In this environment, the Swiss Franc (CHF) continues to benefit from sustained safe-haven demand, driven by both geopolitical tensions and doubts surrounding US monetary governance.

Platinum prices surged alongside Gold and Silver, narrowing its undervaluation relative to Gold, with the Gold/Platinum ratio now just under 2, a level last seen in June 2023, Commerzbank's commodity analyst Carsten Fritsch notes.

Industrial demand limits further Platinum upside

"The price of Platinum also rose sharply in the wake of Gold and silver. However, Platinum has not yet returned to the record level of $2,490 per troy ounce reached at the end of December. The Gold/Platinum ratio is now just under 2, which was last the case in June 2023. The Platinum price has thus significantly reduced its undervaluation relative to the Gold price."

"Further catching up with Gold is likely to become more difficult from now on, as Platinum, unlike Gold, is not a safe haven but is mainly dependent on industrial demand and thus on economic developments. In addition, according to the World Platinum Investment Council's forecast, the Platinum market is no longer likely to be undersupplied this year. Following the sharp rise in Platinum prices, we see only limited upside potential."

"The Platinum price should be trading at $2,600 by the middle of the year and $2,700 by the end of the year. This also applies to Palladium, whose price reached a three-year high of just over $1,980 per troy ounce at the end of December. Due to weakening demand from the automotive industry, by far the most important sector for Palladium demand, the upside potential for Palladium is likely to be even more limited. We expect the price of Palladium to reach $2,000 by mid-year and $2,100 by the end of 2026."

• EUR/USD holds firm as markets digest broadly in-line US inflation data.
• Headline CPI matched expectations, while core inflation softened modestly.
• Traders remain cautious as markets price gradual Fed easing later this year.

The Euro (EUR) holds firm against the US Dollar (USD) on Tuesday as traders show a limited reaction to the latest US inflation data. At the time of writing, EUR/USD trades around 1.1667, consolidating as the Greenback retains a firmer tone.

According to the US Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.3% MoM in December, in line with expectations and unchanged from November. Headline inflation was steady at 2.7% YoY.

However, core inflation softened modestly. The core CPI, which excludes volatile food and energy components, rose 0.2% MoM in December, below the 0.3% market forecast and matching the previous month’s increase. On a yearly basis, core inflation held at 2.6%, undershooting expectations of 2.7% and unchanged from November.

The broadly in-line headline figures and softer-than-expected core inflation suggest upside risks to inflation are not materialising, even as the disinflation process remains gradual, keeping the Federal Reserve (Fed) on a cautious easing path.

Markets are currently pricing in around two rate cuts this year, although investors widely expect the Fed to keep interest rates unchanged through the first quarter. Mixed US labour-market data released last week supported that view, with the Unemployment Rate ticking lower even as headline Nonfarm Payrolls (NFP) came in softer than expected.

Looking ahead, attention turns to speeches from St. Louis Fed President Alberto Musalem and Richmond Fed President Tom Barkin later on Tuesday for further clues on the policy outlook.

The Canadian Dollar (CAD) is trading little changed on the day. Along with a minor gain for the MXN and the generally firmer USD, there is a mild bid for North American FX across markets, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Oil rebound supports slight lift in Canadian Dollar

"Oil prices are up a solid 1%+ and sentiment appears more bullish as tension in Iran grow and President Trump threatens to tariff countries trading with Tehran. The CAD’s recent performance has been dampened by the soft tone of energy prices and subdued terms of trade."

"It’s probably no coincidence that our fair value estimate for the CAD (1.3824) has strengthened for the first time in a week or so this morning as oil prices firm up. Spot formed an inside range session on the daily chart yesterday, suggesting the USD rebound that developed over the turn of the year has stalled."

"The net loss for the USD on Monday tilts technical risks mildly bearish at least. Intraday price action so far adds to the impression of a top/reversal developing above the 1.39 point where we now expect firm resistance. USD losses through 1.3860/70 may prompt a drop back to the low 1.38s over the next day or two."

The United States had an annual inflation rate of 2.7% in December, as tracked by the Consumer Price Index (CPI), matching November’s increase, the US Bureau of Labor Statistics (BLS) reported on Tuesday. These figures matched the market forecast.

The core Consumer Price Index, excluding fluctuating food and energy costs, increased by 2.6% in the same month, down from November’s 2.7% rise.

Monthly, the CPI and core CPI rose by 0.3% and 0.2%, respectively.

Follow our live coverage of the US inflation data and the market reaction.

From the statement: "The index for shelter rose 0.4 percent in December and was the largest factor in the all items monthly increase. The food index increased 0.7 percent over the month as did the food at home index and the food away from home index. The index for energy rose 0.3 percent in December."

Market reaction to US CPI inflation data

The selling momentum in the US Dollar (USD) now gathers traction, prompting the US Dollar Index (DXY) to breach below the key 99.00 barrier amid declining US yields across the curve.

This section below was published as a preview of the US Consumer Price Index (CPI) data at 05:00 GMT.

• The US Consumer Price Index is seen rising 2.7% YoY in December.
• Core CPI inflation should remain sticky well above the Fed’s goal.
• Investors have so far pencilled in 50 bps of easing this year.

The US Bureau of Labor Statistics (BLS) will publish December’s Consumer Price Index (CPI) report on Tuesday at 13:30 GMT. The report is expected to show that prices remained broadly stable in the last month of 2025. As always, it’s a key read on inflation and could stir some short-term moves in the US Dollar (USD).

That said, it’s unlikely to shift the bigger picture for the Federal Reserve (Fed) just yet. With policymakers still focused primarily on the health of the domestic labour market, the data would probably need to deliver a real surprise to trigger any rethink on monetary policy.

What to expect in the next CPI data report?

Inflation itself isn’t expected to spring many surprises. Headline CPI is seen rising 2.7% YoY in December, unchanged from the previous month. Strip out the more volatile food and energy components, and the picture is much the same: core inflation is forecast to edge up slightly to 2.7% from 2.6%, still uncomfortably above the Fed’s target.

On a monthly basis, both headline and core CPI are expected to come in at a fairly steady 0.3%, reinforcing the idea of inflation that’s easing only slowly rather than rolling over.

That also helps explain why December’s rate cut was never a slam dunk. The Minutes released on December 30 show a deeply split Committee, with several officials saying the call was finely balanced and that leaving rates unchanged was a very real alternative.

Previewing the report, analysts at TD Securities noted, “Following the impact from the government shutdown, we now anticipate the core segment to peak at 3% in Q2. We remain of the view that gradual disinflation will be the story in H2 2026. We expect core CPI inflation to end the year at 2.6%.”

How could the US Consumer Price Index report affect EUR/USD?

Investors are still chewing over a mixed set of signals from December’s Nonfarm Payrolls (NFP), but that debate is starting to take a back seat. Fresh threats to the Fed’s independence have resurfaced, and they risk overshadowing the significance of Tuesday’s inflation data altogether.

Given that the Fed is still keeping a close eye on the labour market, December’s CPI numbers are unlikely to change the policy picture in any meaningful way, unless inflation throws up a genuine surprise, one way or the other.

Turning to EUR/USD, Pablo Piovano, Senior Analyst at FXStreet, shared his technical outlook. “If EUR/USD decisively slips below the short-term 55-day moving average at 1.1639, it would open the door to a deeper pullback, with the 200-day SMA at 1.1561 coming into focus sooner rather than later,” he notes. “Below that, attention would turn to the November low at 1.1468 (November 5), followed by the August trough at 1.1391 (August 1).”

“On the flip side, a clean break above the December peak at 1.1807 (December 24) would shift the tone back to the upside. That would put the 2025 high at 1.1918 (September 17) on the radar, with the psychologically important 1.2000 level lurking just beyond,” Piovano adds.

ADP Employment Change Weekly in the United States (US) rises to 11,750 per week on average for the four weeks ending December 20, from a revised 11,000 previously, according to Automatic Data Processing (ADP). The data confirms that job creation in the US private sector remains positive, although the pace of hiring stays relatively modest.

Since the start of 2025, the indicator has averaged 2,320, with an all-time high of 17,500 recorded in November and a record low of -11,750 thousand over the same period.

Market reaction

The report had no significant impact on the US Dollar (USD), with the US Dollar Index (DXY) hovering around 99.00 at the time of writing, up 0.15% on the day, and EUR/USD fluctuating around 1.1650, down 0.10% on the day, as investors await US CPI data.

(This story was corrected on January 13 at 13:45 GMT to say that the release is for the four weeks ending December 20, and not December 27 as previously reported.)