USD: Soft core CPI eases tariff fears but Fed seen on hold – OCBC

The softer-than-expected US core CPI for December suggests that inflation pressures driven by tariffs may be fading. The data is increasing market confidence that the Federal Reserve will keep rates steady in January. Analysts from OCBC, Sim Moh Siong and Christopher Wong, note that while this easing of inflation pressures is positive news for the market, distortions related to the government shutdown still persist, prompting cautious expectations among investors. The core CPI metric is pivotal for the US economy as it directly impacts monetary policy. Currently, markets are bolstering their view that the Fed will maintain interest rates, which could positively influence the dollar. However, given the sensitive economic indicators in play, continuous monitoring is required. Economists and market analysts emphasize the relevance of this data, and various analyses based on different scenarios are being conducted. As specific price levels have not been mentioned, trade directions will depend on upcoming data.