After months of statistical disruption, markets finally received an inflation reference point. The November U.S. consumer price index was the first official snapshot of price pressures following a prolonged government shutdown that had effectively broken the economic data calendar. The release mattered less as a sign of progress than as a test of whether macroeconomic visibility was being restored. From a YourDailyAnalysis perspective, its importance lies not in the headline figures themselves but in what they signal about predictability, which remains a prerequisite for stable currency valuation and capital allocation.
Headline inflation came in at 2.7% year-on-year, with core inflation at 2.6%, below consensus expectations clustered near 3%. On the surface, this places inflation within a range markets increasingly view as tolerable ahead of 2026. However, the absence of monthly price changes materially limits the informational value of the report. With October data missing, the CPI functions as a static confirmation of current conditions rather than a directional guide. From a macro standpoint, this distinction is critical. Markets do not price inflation levels in isolation; they price trajectories. As YourDailyAnalysis has consistently argued, confirmation without direction does little to reduce risk premiums in currency markets.
The composition of inflation continues to point to structural pressure. Prices for household goods rose as firms passed through higher import costs linked to tariffs. Food inflation remained elevated, with meat, poultry, and eggs up close to 5% year-on-year. Shelter costs continued to increase at roughly a 3% annual pace. This profile is consistent with cost-driven inflation rather than demand overheating, reducing the effectiveness of monetary transmission and complicating forward guidance. In this environment, uncertainty does not dissipate with softer headline numbers; it becomes embedded, reinforcing the credibility concerns highlighted by YourDailyAnalysis in its broader assessment of U.S. macro conditions.
For currency markets, inflation matters less as a price variable and more as a signal of governance, policy coherence, and institutional credibility. For much of the past decade, the United States absorbed elevated inflation without meaningful currency damage. Strong relative growth, higher interest rates, deep capital markets, and institutional stability sustained a durable dollar premium. In 2025, that configuration began to weaken. As YourDailyAnalysis has noted in its coverage of structural FX repricing, disinflation occurring alongside policy distortion is fundamentally different from disinflation driven by productivity or supply-side normalization. In this case, tariff effects, political pressure on the central bank, and prolonged data gaps forced investors to reassess not the pace of price moderation but the stability of the underlying framework.
This reassessment defined the dollar’s trajectory in 2025. Between January and June, the dollar fell roughly 11% against a basket of major currencies, marking its weakest first-half performance since the early 1970s. The comparison is structural rather than cyclical. Markets entered the year assuming continued U.S. outperformance supported by capital inflows, resilient consumption, and policy independence. That assumption eroded as trade policy uncertainty and fiscal ambiguity forced a simultaneous repricing of growth, inflation, and debt expectations. From the standpoint of YourDailyAnalysis, the critical signal was not the speed of the move but the fact that it unfolded despite relatively firm policy settings, underscoring that valuation was increasingly driven by perceived predictability rather than interest-rate differentials.
Capital flows amplified this dynamic. Foreign investors hold more than $30 trillion in U.S. assets, much of it historically unhedged. Early-2025 dollar weakness altered that behaviour. Even marginal increases in currency hedging can generate persistent selling pressure given the scale of foreign ownership. This represents a structural adjustment rather than a speculative episode. Once hedging norms shift, currency dynamics change independently of short-term macro surprises, a mechanism repeatedly emphasized in YourDailyAnalysis assessments of global capital allocation.
By mid-year, the dollar’s decline had stabilised. Stronger-than-expected summer data and limited immediate economic fallout from tariffs helped arrest the sell-off. However, stabilisation did not translate into recovery. The dollar traded sideways near its lows through the second half of 2025, suggesting that the initial repricing phase had ended without restoring the prior premium. Markets appeared unconvinced that uncertainty had been resolved.
Looking into 2026, the relevant question is not whether the dollar will collapse, but whether markets will complete the repricing initiated in 2025 or conclude that the United States remains the least risky option by default. Some strategic views anticipate further dollar weakness as U.S. growth slows, rate differentials narrow, and hedging activity persists. Alternative scenarios point to renewed demand for dollar liquidity in the event of global stress. Both outcomes are plausible. What appears unlikely is a rapid return to the unchallenged dollar dominance of the 2010s.
The defining market shift of 2025 was not the magnitude of the dollar’s decline, but the reason behind it. Inflation has become a proxy not for price stability, but for confidence in economic governance. As long as data visibility remains incomplete and cost pressures uneven, currency markets are likely to demand a premium for uncertainty. In 2026, this implies a dollar characterised by volatility and constrained upside rather than renewed structural strength – a conclusion consistent with the core analytical framework of Your Daily Analysis.
