The market will analyze CPI figures with respect to the prospect of another Fed rate hike, though the regulator prefers to monitor the PCE index due at the end of January. The December is expected to ease to 0.2% m/m following a jump by 0.4% in the previous month. If so, it will be another blow for the greenback, while dismal retail sales figures may add to the downward pressure.
In the longer term, the key risk for the USD in 2018 is Trump’s domestic and foreign policy. The latest events signal a background for a trade war between China and the United States, which may pose a threat to the global economy.
Increase of tensions on this front will further undermine USDJPY’s positions. The pair slipped to the 111.25 end of November lows and is now trying to stage a recovery which is capped by the 112.00 hurdle. Failure to regain this level will introduce scope for 111.00 area and lower.