The U.S. Bureau of Labor Statistics (BLS) will release the important figures of the Consumer Price Index (CPI) for November on Thursday at 13:30 GMT.

The inflation report does not contain CPI figures for October and also does not provide monthly data for November due to a lack of data collection during the government shutdown. Therefore, investors will pay extra attention to the annual CPI and core CPI to assess how inflation may influence the Federal Reserve's (The Fed) policy.

What to expect from the next CPI report

According to the change in CPI, inflation in the U.S. is expected to rise year-on-year by 3.1% in November, slightly higher than the figure from September. Core CPI inflation, which excludes volatile food and energy prices, is also expected to rise by 3% during this period.

TD Securities analysts expect annual inflation to rise stronger than predicted but see core inflation remaining stable.

'We expect the US CPI to rise by 3.2% year-on-year in November - the fastest pace since 2024. This increase is primarily due to higher energy prices. We expect core CPI to remain stable at 3.0%,' they explain.

How can the US Consumer Price Index report affect the dollar?

Ahead of the U.S. inflation figure on Thursday, investors estimate according to the CME FedWatch Tool nearly a 20% chance of a Fed rate cut of 25 basis points in January.

The delayed official employment report from the BLS showed on Tuesday that Nonfarm Payrolls fell by 105,000 in October and rose by 64,000 in November. Moreover, the U.S. unemployment rate increased from 4.4% in September to 4.6%. These figures did not change market expectations for the Fed's decision in January, as the sharp decline in employment in October was anticipated due to the loss of government jobs during the shutdown.

In a blog post, Atlanta Fed President Raphael Bostic said on Tuesday evening that the mixed jobs report does not affect policy expectations. He also mentioned that there are 'multiple studies' indicating higher costs and that companies are raising prices to protect their profit margins.

A clear increase in CPI inflation (3.3% or higher) may prevent the Fed from changing its interest rate policy in January and could immediately strengthen the U.S. dollar (USD). Conversely, if annual inflation comes in at 2.8% or lower, market participants may anticipate a rate cut in January, putting immediate pressure on the USD.

Eren Sengezer, European Session Lead Analyst at FXStreet, provides a brief technical forecast for the US Dollar Index (DXY):

'Short-term technical analysis shows that the bearish trend for the USD Index continues, but there are signs that the negative momentum is weakening. The Relative Strength Index (RSI) on the daily chart rises above 40, and the USD Index remains above the Fibonacci 50% retracement of the rising trend from September to November.'

'The 100-day Simple Moving Average (SMA) now acts as a pivot point at 98.60. If the USD Index manages to close above this, technical sellers may be discouraged. In that case, the Fibonacci 38.2% retracement may offer resistance at 98.85, ahead of the region 99.25-99.40, where the 200-day SMA and the Fibonacci 23.6% retracement are located.'

'On the downside, the Fibonacci 61.8% retracement is an important support level at 98.00, followed by 97.40 (Fibonacci 78.6% retracement) and 97.00 (round number).'