USD faces 2025 inflation uncertainty despite 8-month policy shift

The US dollar remains stable around 108.50 on the DXY index as markets assess inflation prospects eight months after significant policy changes. Despite expectations of inflationary pressures from fiscal stimulus and trade policies, core PCE inflation continues hovering near 2.8%, failing to show the anticipated surge. Federal Reserve officials maintain a cautious stance, with markets pricing in only two 25-basis-point rate cuts for 2025, down from earlier projections of four cuts. The disconnect between policy expectations and actual inflation data creates uncertainty for USD pairs heading into the new year. Technical indicators suggest the dollar index faces resistance at 109.00 while finding support at 107.80. Traders are closely monitoring upcoming CPI releases and Fed communications for clearer direction, as the 'inflation mirage' phenomenon could lead to significant repricing across major USD pairs if expectations fail to materialize.